Publish date:

Ad Sales Chief Sees AOL on 'Road to Redemption'

The biggest question is how to expand the online-advertising market as a whole, Lisa Brown says.

America Online's problem wasn't that it was evil, a top AOL advertising executive said Wednesday. Rather, she said, it was inept.

"There's nothing nefarious that ever occurred here," said Lisa Brown, who's in charge of reviving an online-ad business plagued not only by the industrywide dot-com meltdown but also by allegations of inappropriate revenue recognition at AOL.

Brown told a group of advertisers in New York that her predecessors at AOL in the late 1990s were focused on landing big deals at a time when "the company was not set up to execute against these deals" -- that is, deliver what advertisers thought they were buying.

Said Brown, "You had huge expectation, and you had executional issues that really caused buyer's remorse in some cases."

Brown's assessment came as the executive made her first extensive public comments since taking over the role of AOL advertising chief only four months ago. These comments -- covering subjects such as elaborate online ads, AOL's past mistakes and the booming search-engine advertising market -- illustrate the state of the online-advertising business now, as well as the strategies that AOL is now employing to win back advertising dollars.

Pivotal Role

In her new job, Brown is in charge of fixing one of the most reputation-battered operations at

AOL Time Warner

(AOL)

-- the media giant that so far has been unsuccessful in living up to the promise behind its January 2001 creation.

Beset by AOL's troubles and missed financial goals, AOL Time Warner has seen its stock lose more than two-thirds of its value since its post-merger peak. The company is forecasting its online-advertising revenue to drop 35% to 45% from the $1.3 billion reported in 2003, mostly because of the expiration of boom-era contracts.

AOL Time Warner's shares fell 11 cents Wednesday to trade at $16.07.

Speaking to an audience drawn from advertising agencies and corporate marketers, Brown was both apologetic about AOL's past mistakes and bullish about current opportunities. While Brown didn't rehash it in detail, AOL -- making the most of an era in which cash-laden dot-coms were begging for prominent placement on the service -- had a reputation for take-no-prisoners negotiations that squeezed every available dollar out of its marketing customers.

With the balance of power in the Internet advertising business now having swung far in favor of advertisers, Brown was appropriately penitent in her appearance at the Interactive Advertising Bureau trade association meeting. AOL "lost the hearts and the minds of the advertisers and the support of the agencies," she said in a question-and-answer session run by industry veteran Jack Myers. "We created our own issues," Brown said. "We have nobody to blame but ourselves.

"We are now on the road to redemption," Brown said.

Taking Steps

In her comments, Brown alluded to several steps that AOL had taken to create a more advertiser friendly environment. These include cutting the number of advertisements displayed on a single page, and fixing AOL's prior inability to run what are called "rich media" ads -- ads with audio and video or animated elements that are more elaborate than traditional banners or button-sized ads.

Brown also spoke charitably of her biggest rivals for online-advertising business,

Microsoft

TheStreet Recommends

(MSFT) - Get Microsoft Corporation (MSFT) Report

and

Yahoo!

(YHOO)

.

"I root for my competitors, and I absolutely applaud what they're doing," Brown said. The online-ad business's top priority, she said, is to increase online advertising's current 2.5% share of media spending to a 15% share of media dollars. Then, she said, the online firms can fight against each other.

Hinting at the day-to-day struggle that AOL and other online publishers face with advertisers, Brown talked about the importance of persuading advertisers of the value of online advertising, and pricing it appropriately -- or, as she put it, to "not cave so quickly" on price.

As part of its effort to build demand for online advertising -- and to create, eventually, an "upfront market" for online ads akin to the TV industry's annual sales bazaar -- Brown said the company would be hosting a Sept. 16 presentation to advertisers in New York. A month ago, she said, AOL met with all the movie studios, giving them an opportunity to plan ahead with their online advertising and buy upfront.

While Brown said she appreciated landing big deals with advertisers, AOL was now taking a more slow-and-steady approach, she said, corresponding to the message of the Oliver Stone football movie

Any Given Sunday

. "At the end of the day," said Brown, "this game is won in inches."

In the Q&A, Brown didn't address search-engine advertising, the fastest-growing portion of the online-advertising business -- now dominated by

Overture Services

(OVER)

, due to be acquired by Yahoo!, and the privately held Google. Afterward, she told

TheStreet.com

that search-engine advertising was indeed important, but that the "bigger idea" was how search-engine ads were integrated into a larger advertising package.