AOL's New Plan: Content, Content, Content

The giant portal's MediaGlow unit is betting on a huge traffic advantage to make scores of new sites, including PoliticsDaily, a success

You may be forgiven for rolling your eyes at another story about AOL (TWX) yanking back the curtains to present a shiny new notion. Ex-Google (GOOG) ad head Tim Armstrong is AOL's third new CEO since 2006. The company has gone through something like 72 strategies since merging with Time Warner in 2001, if I am counting correctly.

Nevertheless, the revenue-challenged (its ad dollars shrank 18% last quarter) and consummately uncool AOL is readying a blitz around Web content through its (unfortunately named) MediaGlow unit, which encompasses all of AOL's content sites. There now are more than 70, ranging from the broad behemoths—AOL News, celeb outlet TMZ—to the more tightly defined, like PlaySavvy, for parents of video gamers. And MediaGlow has previously disclosed plans to launch at least 30(!) more in 2009.

AOL has been here before. Online observers with elephantine memories may recall the company's mid-'90s unit, Greenhouse, set up to . . . incubate content sites. Still, MediaGlow's ambitions are swelling. A long-discussed general interest site for women will be launched this year, insiders confirm, to compete with the likes of NBC Universal's iVillage. Later this month comes PoliticsDaily, which will be edited by former New York Times reporter Melinda Henneberger and staffed with other established political writers.

Many of MediaGlow's most recent content hits—for instance, the young men's site Asylum, which last month garnered more than 3.6 million unique visitors, according to comScore—share a common online business model: Hire a few low-cost bloggers and stoke traffic by having them fling torrents of posts, links, and photo galleries at the Web. But a raft of recent hires of well-known writers, especially at AOL's sports site FanHouse, shows the company is willing to pay for established talent. Wobbly as the business of content may be, AOL is doubling down on it.

AOL's last few years have been an aria of falling revenue and internal tumult. And the for-sale shingle hung on the business apparently has drawn little interest. Still, AOL comes to this game with substantial advantages, thanks to its daily gusher of traffic. Its sites still get more than 100 million unique visitors each month; around one-third of that traffic hits the home page. And its e-mail and instant messaging services still are widely used. MediaGlow CEO Bill Wilson disclosed through a spokeswoman that around 40% of MediaGlow's traffic comes from AOL's home page and other sites in the AOL network. (MediaGlow executives declined to discuss revenue levels, but two familiar with the operations say revenues last year were well into nine figures.) The existing traffic makes it easier to notch serious numbers quickly for a newly launched content site. It also makes launching so many sites this year much less onerous than it would be for a new or smaller company. The mad rush toward growth in '09 makes more sense if you agree, as I do, with the widely held belief that Time Warner will pursue a spin-off of AOL before long.

All of this requires a tightrope walk. MediaGlow has to take advantage of AOL's bona fides—all that referral traffic—while understanding that the AOL brand is a turnoff, not catnip, to curious Webheads. The company renamed its AOL Sports portal FanHouse, and insiders say it also has mulled dropping the AOL News handle for one that doesn't mention the parent. (MediaGlow executives declined to comment on this prospect.) As for other launches, a spokeswoman confirms that sites targeting pet owners and gamers are on tap. AOL also owns a ton of trademarked names it has yet to use. Look for at least two—Kitchendaily and Reality Squad, a blog about reality TV—to surface in 2009 as well.

The new breed of offerings reflects a core reality: AOL has to take the riches still thrown off by declining assets—most of its portals, such as AOL News, have flat or reduced traffic—and invest them in new places to keep growing. This is a very Old Media problem for a New Media company, but AOL has always betrayed more than a hint of the traditional. The giant long ago lost its glow (sorry), but the massive traffic it continues to attract suggests that the online incumbents still have many advantages, no matter how retrograde they seem.

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