The company is hoping that by providing a more targeted experience for users, more accurately targeted ads can be served. As a result of more accurately targeted ads, there should be higher click-through rates. That means ad rates can be raised and AOL's revenue will climb.
This approach is an effort to begin building web ad inventory that is separate from the AOL portal. The knock against portals is that they are too general in their content and therefore, it is harder to ensure marketers are reaching the customers they are looking for. By moving down the "long tail" and capitalizing on many users in numerous smaller, more defined groups, AOL expects to actually increase the total size of their audience, even as it fragments that audience.
Ironically, it is the AOL portal, with its millions of daily visitors, that provides the launch pad for all the niche sites that AOL intends to create.
Why this is harder than it looks:
AOL refers to the niche sites as "passion points" but the success or failure of the niche sites may indeed depend on the passion of those in charge of generating content. If the niche sites have a corporate feel, lack a strong point of view and fail to provide a compelling reason to users to visit and return, AOL may end up just squandering capital and distracting management by going in too many directions.
There are some early signs of success. According to traffic measurements by comScore Inc., AOL has had seven consecutive months of year-over-year growth in both unique visitors and page views. For the entire first quarter, page views for AOL's content-focused sites, which exclude e-mail, instant messaging and the general AOL.com portal, grew 22 percent to 9.5 billion compared with the same period in 2007. The content sites had 55 million visitors in April, up 12 percent.
The traffic growth, however, hasn't translated to ad dollars, which were flat in the first quarter.
Ad Network Expansion --
"Platform-A is AOL's way of turning itself inside-out, and refocusing on serving ads outside of AOL across the Web." AOL has taken the opportunity to focus on serving ads for any advertiser on any web property. The company is not limiting itself to just serving pages of its own content.
Why this is a good idea:
According to ComScore, AOL's Platform-A is the leading online advertising network, reaching 167 million unique visitors in February and edging out Yahoo! by 5% and Google by 10%.
AOL has built Platform-A by acquiring a series of advertising companies such as Advertising.com, Tacoda, Quigo and Third Screen Media at a cost of about $1 billion.
AOL Chairman and CEO Randy Falco says that at this price, Platform-A was a bargain compared with Microsoft's $6.1 billion purchase of aQuantive and Google's $3.1 billion acquisition of DoubleClick, about 10 times DoubleClick's revenues.
