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AOL Seeks Another Remake, This Time as Tech Company

NEW YORK - (AOL - Get Report) has been through so many transformations, premature deaths and tantalizing re-generations that the Internet company best known for piloting the worst merger in U.S. business history is attempting to fashion itself yet again, this time as a technology company that produces a lot of premium-video content.

When AOL CEO Tim Armstrong takes a New York stage Monday evening to host what he's billing as the first-ever online programming upfront, Bob Lord, the former CEO of digital marketing trailblazer Razorfish and the Publicis Group, will likely be nearby.

And for good reason. Though Susan Lyne, formerly of Martha Stewart Living Omnimedia (MSO) and ABC Entertainment is handling the creation of AOL's lineup of original programming, Lord has been tasked with selling the content upfront, in the same manner that television networks like (CBS) have been selling advertising time on their broadcasts for much of the past 60 years.

"Monday is a watershed moment not only for AOL but for Internet programming," said Robert Peck, Sun Trust Robinson managing director and Internet analyst in a phone interview. "It's the first time we've seen something like this happen, and it demonstrates that Tim is trying to embrace the trend to premium-video content that his advertisers are telling him is happening."

AOL may still be best known for its disastrous $350 billion merger with Time Warner  (TWX) in 2000. But in the four years since the two companies split, the digital publisher has quietly acquired an array of Internet advertising platforms that let machines buy and sell online ads, especially more lucrative video ads (as opposed to display advertising).

On Monday, AOL will attempt to sell marketers, advertising agencies and Wall Street investors on a group of original online programming featuring personalities such as Gwynneth Paltrow, Sarah Jessica Parker, Hank Azaria and Nicole Richie. The programming is aimed at appealing to corporate advertisers looking for content of a much higher quality that the vast clutter of DIY creations that populate the Web.

To do this, Lord wants to sell marketers on AOL's programming at Huffington Post, TechCrunch and the company's still popular Web portal. But he also wants to show them how AOL's platform Advertising.com, Ad-Tech and Adap.TV, the online video technology service it acquired last month for $405 million in cash (Armstrong's largest acquisition since taking over its top job in 2009) can make AOL the go-to place for matching advertisers and video publishers that use computers to power what the industry calls programmatic buying.

It's all tall order but likely stands as AOL's best and maybe final attempt to remake itself into something that is greater than the sum of its diverse array of properties.

"AOL is a media company but it's also a technology company, which is something I think people overlook," Lord said in a phone interview. "When you look at the pieces that Tim has assembled, it rivals what Google  (GOOG) has put together."

Lord's pitch is that AOL's technology will save marketers money by finding the right place for them to place their message in the fastest most efficient manner. It may come as a surprise to know that AOL posts more online video than any other site on the Internet apart from Google.

 "The automated play will allow us to give money back to the marketers and the agencies, so that they can do more in creativity and content," he said.

The company could certainly use a shot in the arm. Profit last quarter fell short of analysts' forecasts, ending of streak of six straight quarters in which net income surpassed estimates.

Profit, excluding some items, was 41 cents a share, missing the 45 cents analysts predicted, on average, according to data compiled by Bloomberg. That broke AOL's streak of six straight quarters of topping profit estimates, raising questions about Armstrong's ability to consistently deliver growth. In August, Armstrong fired some 500 employees from Patch, the money-losing hyper-local news operation that he helped create, an enterprise that has mostly struggled to gain traction with advertisers. Armstrong promises Patch will be profitable by year's end.

Raising questions about AOL's work culture, Armstrong attracted some negative attention by abruptly firing an employee in the midst of a company-wide conference call held ironically to rally his Patch employees to work harder. A recording of the heated firing went viral prompting Armstrong to issue an apology. 

For AOL and others in the digital-publishing business, the big target is the $197 billion that Magna Global forecasts will be spent in 2013 on television advertising. By contrast, about $6.6 billion will be spent on online video advertising, according to the researcher. AOL's goal, shared by its many rivals, is to shave even a few percentage points off that mountain of revenue.

"The shift will happen as we prove that we can get to audiences at a scale level through machines and machine logic," Lord said.

Lord insists that the Internet is poised for a dramatic shift in advertising expenditures. To illustrate his point, he likes to make an analogy with electronic trading in stocks and bonds. Time was when Wall Street scoffed at the idea of trading through computers as if the process rested solely on men in blue coats scurrying about in open-aired floors in New York and Chicago. Yet that transformation occurred, and then some. The same transformation, Lord argues, is poised to take place in online advertising.

And AOL wants to be among its leaders, selling both its content and technology while erasing all lasting memories of that silly thing that happened with Time Warner many years ago.

"The previous attempts to grow, things like Patch weren't as successful as Tim would have hoped," Peck said. "But what I like here is he's clearly focusing on the emerging trends of programmatic as well as video, and he's leading the charge there. Bob Lord is the right man for the job. This is sort of like Growth 2.0 for them."

Written by Leon Lazaroff in New York

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