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Struggling AOL switches focus to content

US web giant ready to be spun off by Time Warner

As it braces to be spun off and struggles with revenue, Time Warner's AOL internet unit is busy crafting a new strategy focused around content creation that represents a shift in its focus, AOL's CEO, Tim Armstrong, said on Thursday.

"We're focused on growing a large platform around content and monetising that content," Armstrong said on stage at the Web 2.0 Summit in San Francisco.

Pressed to provide more details by conference chairman John Battelle, Armstrong was unwilling to be more specific. "We have a secret sauce we're not ready to announce yet and we’ve been working on something for the last three months which is a fairly substantial shift on our technology," he said.

In the past six months, AOL has grown its staff of journalists from 500 to 3,000, as it scales up the reach of the ongoing project, Armstrong said.

Armstrong also said AOL is getting ready for its imminent separation from its parent company. Time Warner announced in May concrete plans to rid itself of the struggling Internet unit by spinning it off as a publicly traded company.

Thus, it's key for AOL to show signs of a turnaround, in order to attract interest from investors. In the first quarter, AOL saw its ad revenue shrink 20 percent year-on-year. It registered revenue declines in ad sales on external sites, as well as in display and paid-search ad sales in AOL sites.

Overall, AOL's revenue, which also includes subscription fees, fell 23 percent to $867 million, while operating income tumbled 47 percent to $150 million in the first quarter.

Armstrong was president of Google's Americas operations, responsible for North American and Latin American advertising sales and operations, when AOL hired him to replace CEO Randy Falco in March of this year.

Armstrong said AOL is in no hurry to renew a five-year search technology and advertising deal the company signed with Google in late 2005 because in the interim, AOL's priorities and focus have changed. Thus, AOL is mulling how it would structure a renewal to have it be "the right deal for our strategy", he said.

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