AOL, Revenue, and Customer Experience
April 29, 2010
I liked the Relegence technology. The system sucked in content and generated really nifty reports. Now Relegence.com is a 404, a bit like the AOL earnings report summarized in “AOL Sales, Earnings Plunge.” I don’t use AOL, but like SAP, it is one of the companies that dabbles in search and content processing and provides important clues about the trajectory of these two disciplines. For example, you can navigate to AOL.com and run a query for Relegence, which AOL bought in late 2006. See “AOL Buys Relegence for Relevance.” The search results don’t come from Relegence, Fast Search, Personal Library Software, or any other commercial search system with which AOL has dallied in the last six years. The results are “Enhanced by Google.” Makes sense. AOL is run by a Googler, a pattern that seems to be like those old repeating wallpapers on Web pages in 1996. The idea is that a Googler inherits the Google magic. Therefore, the reasoning goes, a Googler can take a portal and make it into a cash machine.
I like this type of thinking but AOL is one of the online companies that was never in the search, content, or information business. Shocking, right? In my little corner of the goose pond, AOL sold potential dreams in the form of dial up access billed monthly. The company was a digital ShamWow operation. The carpet bombing of sign up discs created a cash stream that seemed to be unending.
It ended. AOL did not have another revenue stream of comparable magnitude. I have watched the acrobats try to disguise this simple fact with many different initiatives. Nothing really worked. Now the earnings reports make clear that Google magic is not transferable and that the original content angle is not exactly like the automatic billing and tough-to-cancel monthly service which was the golden goose at AOL.
Here’s the snippet I liked from the CNN story:
The New York-based company posted net income of $34.7 million, or 32 cents per share, in the first three months of 2010. That’s down from $82.7 million, or 78 cents per share, in the same period last year.
My second favorite segment was:
“We are now entering the second phase of AOL’s plan which is to greatly improve the consumer experience, scale the advertising systems and teams, and aggressively pursue our strategy in the marketplace,” said Armstrong.
I know nothing about user experience. But I do know a bit more about money.
Why’s this matter?
It means zero to me since I don’t own any shares in the company. Furthermore, since the Relegence service became Love.com I don’t use the service too much anymore. I mean, really, Love.com for an optimized business intelligence engine?
It does matter for these reasons:
- If advertising goes south, the AOL trajectory may be the “line” that Yahoo and Google will follow. If I am correct, this “line” will be an errant one indeed.
- The many AOL efforts remind me of the scrambling, hyperbole, fancy dance steps and repositioning that content centric companies do * before * their decline accelerates. The AOL moves are harbingers of what will happen if the European financial problems exacerbate the US financial situation.
- AOL may never be able to regain the revenue streams from its dial up, CD ROM marketing era. Without the golden goose (no pun intended) of recurring monthly credit card billings, AOL is just another company trying to make dough on the Internet.
Is this germane to other companies? Yep. Every time I read an inflated news release with words that are superlatives or use metrics like X times better, faster, and cheaper, I know there is some pressure on the managers.
When a Googler cannot pull a rabbit from a beanie with a propeller on top, who can? Maybe Facebook, but that company is in a different business. The irony is that AOL was an early type of Facebook. Now Facebook has jumped over AOL and its Googler boss.
The take away for me is that once that big revenue stream is in decline, replacing the money flow is a tough problem. Advantages go away. A company is just another start up with long, long odds for success.
Just my opinion.
Stephen E Arnold, April 29, 2010
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One Response to “AOL, Revenue, and Customer Experience”
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Hey Stephen.
the relegence team and technology is still alive and well.
check out music.aol.com for a sample..