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WEB 2.0: AOL CEO quiet on Microsoft rumours

The Miller approach to AOL

AOL chairman and chief executive officer, Jonathan Miller, has kept quiet over rumours of Microsoft buying, or at least striking up a partnership, with AOL to boost its MSN Internet division.

"I'll try to say something but avoid the question," Miller said smiling during a session in which he chatted with conference chair John Battelle and audience members.

Battelle suggested that Microsoft's MSN unit might be aggressively seeking to sign AOL up for MSN's new sponsored search ad network. Miller acknowledged that AOL is a "swing voter" in the market for sponsored search ads because of its traffic volume. AOL currently serves up Google ads with its general Web searches, which are also powered by Google.

Miller was more forthcoming about AOL's recent abandonment of its walled-garden philosophy of providing services to paying subscribers only. It is shifting to an open Web portal approach, such as Yahoo's, in which most of the offerings are free and the revenue comes from advertising sales. "We're in that transition. It's a business model transition", he said.

It was hard to change the company's mentality, but "that's done", he said. His goal when he joined AOL in 2002 was to "get the company in sync with the market", the walled-garden approach had to be ditched in order to accomplish that.

However, the decision to switch to an open Web portal was not prompted by the steady decrease in subscriptions. As of March 31, 2005, AOL had 21.7m US subscribers - down 2.3m from the same period in 2004 and a further 4.5m from the first quarter of 2003.

Even if the subscriptions had been rising to the likes of 40m in the US today, that figure would still be unacceptably low and limiting, compared with a potential Web audience of hundreds of millions. AOL is one of only a few Internet companies with a big, global brand, a status that is hard to accomplish that has been attained by a select group which includes Google and Yahoo, he said. "The worst you can do is limit" that type of broadbrand, he said.

Miller made it clear that the shift away from the walled-garden approach doesn't mean AOL is abandoning its ISP business. He said the number of subscribers has stabilized in Europe and is likely to grow next year. AOL will look for increased international expansion and therefore will change its official name from America Online to AOL.

"AOL is a brand name that can travel the world," Miller said. The international expansion will be sought as a Web business, not an Internet access business and it will include China.

Another area on which Miller is focused is repairing AOL's brand perception with customers by launching a campaign that stressed to users that AOL can keep them safe online. He has done well as internal studies have shown that AOL has restored its "fundamental trust" with customers. "Trust underlies everything else you're trying to do vis-a-vis consumers," Miller said.

Asked why AOL didn't buy Ask Jeeves, Miller said that "the math didn't make any sense to me", plus AOL has made a decision not to compete in general algorithmic search, a field dominated by Google. Instead, it is investing in vertical-search technology, such as its Singingfish multimedia search engine, he said.

On the topic of video content, he said the market is at the "cusp of video consumption on the web" and considers AOL is and will continue to be a leader in that space. That includes providing both commercial video content as well as user-generated amateur video content. The latter type of video content will be boosted by AOL's proposed acquisition of Weblogs Inc., announced Thursday, which Miller expects will yield not only user-generated text and photos but also increasingly video. Weblogs Inc. is a network of 85 blogging sites about a variety of topics. The acquisition, whose terms weren't disclosed, is expected to close next week.


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