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AOL introduces new advertising network

AOL stepped up its transformation from Internet access provider into an ad-driven business Monday as it announced plans to move its corporate headquarters and consolidate its advertising operations.
/ Source: The Associated Press

AOL stepped up its transformation from Internet access provider into an ad-driven business Monday as it announced plans to move its corporate headquarters and consolidate its advertising operations.

AOL's senior executives, ad sales representatives and content producers will move next spring to New York's Greenwich Village, bringing them closer to the heart of the media-advertising industry. AOL is currently based in Dulles, Va.

"By putting our headquarters there, we're sending a clear signal to the market that AOL intends to lead in this space," Chief Executive Randy Falco told employees Monday.

The company, which since last August has cut some 5,000 jobs, or roughly a quarter of its global work force, expects to retain a large presence in Dulles, as well as Mountain View, Calif., Bangalore, India, and other locations. Falco told employees "that for most of you, this won't affect your jobs at all."

AOL would not say how many jobs will be affected. Those who move will join about 400 already working in New York on advertising and content production.

Say all you want about the Internet bridging far-flung locales, but "it's very difficult to maintain a close relationship and not be physically with someone on a regular basis, someone you're hanging with at night, drinking with, having them over for dinner," said Rob Enderle, an industry analyst with the Enderle Group.

Ron Grant, AOL's president and chief operating officer, said in an interview that advertisers have been demanding closer relationships and that the consolidation in New York would "expedite decision-making and improve value to advertisers."

AOL, which is looking to advertising to offset plummeting subscription revenues, also announced plans for a new entity called Platform A, combining technologies and services offered by various units AOL acquired in recent years, including the behavioral-targeting company Tacoda Inc. and mobile-advertising company Third Screen Media.

Grant said the new unit would allow various platforms to share innovations. Platform A also will help potential advertisers more easily buy ads across all AOL properties along with third-party sites that have become part of the AOL network through various acquisitions. Those sites include The New York Times and NBC Universal, both of which compete with AOL's own news portal.

AOL said the ultimate goal is to give advertisers access to as many potential viewers — whether on AOL or at a rival — through a single sales point.

"There's been a big shift in advertising to favor the networks," Grant said. "We don't think portals are big enough to meet the needs of advertisers."

The one-stop shop approach should make AOL more attractive to advertisers and ad-placement agencies, said David Hallerman, a senior analyst at the research group eMarketer.

AOL isn't alone in trying to extend beyond its own sites. Google plans to buy DoubleClick Inc., while Yahoo acquired Right Media Inc. and Microsoft bought aQuantive Inc. to further their ad reach.

AOL has had its headquarters in northern Virginia ever since it formed in 1985 as Quantum Computer Services. It moved from Vienna to Dulles in 1996 and now employs about 4,000 in the area.

The company will locate its new headquarters in a 15-story building in Greenwich Village, a few miles from AOL's corporate parent Time Warner Inc. AOL's New York employees are currently at Time Warner's old headquarters at Rockefeller Center.

Mike Kelly, 50, president of the AOL unit in charge of advertising sales, is leaving the company as part of the move. Curtis G. Viebranz, who headed the Tacoda subsidiary, was named president of Platform A and an AOL executive vice president.

The announcement comes a little more than a year after AOL accelerated efforts to drive traffic to its ad-supported Web sites by giving away e-mail accounts, software and other features once reserved for paying customers.

AOL, once an Internet powerhouse, has been seeing subscription revenue plummet as Americans switch from dial-up to broadband access. It has managed to slow down its decline by boosting its quest for advertising dollars, but its growth in advertising slowed in the second quarter.

Time Warner executives have acknowledged that ad dollars have been shifting toward third-party ad networks, putting pressure on AOL's own sites and increasing the importance of integrating networks acquired through separate deals.