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RealTime IT News

AOL, a Media Company? Get Over It!

While AOL Time Warner has tried a number of ways to fix the problems plaguing the America Online division, it still hasn't changed the fundamental way it approaches its business. And that might be crippling AOL more than any problem like accounting irregularities, lower ad revenue, flat subscription rates or sagging broadband initiatives.

For AOL management to fix the division's problems, it first needs to stop thinking of the company as a media business and start thinking of it as a technology company. After all, that is what the Internet really is, right? It's not just a new form of media but a technological platform for electronic communications. Yet despite this obvious fact, AOL's management is only now starting to address its long-neglected technology platform.

To be fair, it might not be AOL's fault entirely. It's been "new media" brainwashed to think that way by everyone from advertisers to bankers to lawyers to its own brethren on the traditional media side. Back in March 1998, I got the opportunity to attend Daily Variety magazine's Big Picture conference -- a show for New York's financial community to rub elbows with bigwig media darlings. That year was the first time AOL was featured at the event...the first time AOL started to make a splash on the New York media scene.

I know events like this don't give birth to false notions, but it certainly did serve to reinforce the pretense that AOL was a media player. The rest is history. Under the helm of Bob Pittman, AOL steered and outmaneuvered other media companies in mastering the World Wide Web. And while AOL was busy solidifying plans to be the online component of traditional media businesses, the rest of the high-tech community went through the dot-com bust. Whether management is at fault or part of an environment gone awry, sooner or later there will be no one else to blame but AOL. AOL needs to address the technology side of its business and rid itself of arcane proprietary software.

For example, AOL still hasn't opened the application programming interface for the most lucrative part of its service -- the so-called "Rainman" proprietary technology. How would that help? Just ask Amazon, eBay and Google. Or even Microsoft.

"Amazon and Google have Web Services API," said John Radko, chief architect at Global eXchange Services, a GE company that is the largest global provider of electronic data interchange (EDI) services. "A fair number of their customers are technically inclined. They created an interface and put it out there for people to try it out. And it proves to be beneficial."

AOL says it helps e-commerce partners integrate the service into their shopping cart systems. It has long argued that Rainman is proprietary for a good reason: top dollar. Partners pay a lot to get onto that system. But AOL's leverage has also been affected by the changing environment too. An AOL keyword is no longer a recipe for success and plenty of businesses thrive without an AOL keyword.

Rainman's technical limitations affect everything from advertising to e-commerce. With simpler ways to integrate into the AOL service, more partners could access AOL members, which might even help to stem the 50 percent drop in e-commerce revenue projected for next year. In addition, advertising partners would have a much easier time bringing rich-media technology onto the Rainman platform, helping to boost ad revenue.

But Rainman is only symptomatic of AOL's entire problem. It has been very slow to adopt open software standards. AOL has opened up the API of its other Web properties. Its ubiquitous MapQuest service offers its API to partners who want to add location-based services. But while Microsoft has worked to provide developers with tools and find development partners for its MapPoint technology, AOL is just now evaluating software based on the open XML architecture.

And AOL is finally playing around with the idea of stand-alone software such as with its email client. But up until now, AOL has fought attempts to support Simple Mail Transfer Protocol (SMTP) to manage email. This makes it much harder for newsletter publishers and email marketers because they need to create special AOL-friendly versions of everything they distribute.

Whether AOL comes around in time can't be predicted. What is clear is that it has lost its focus. Perhaps it wouldn't hurt for AOL's management to remind itself by thinking every once in a while: Why in the world does Time Warner own a technology company anyway?

Bob Liu is executive editor of internet.com's News channel.