AOL Reshuffles (Again) to Position for Ad Recovery

America Online has created a new division to handle advertising, search and commerce revenues across all of its properties. It named Time Warner executive Michael J. Kelly as its head.

The division, called AOL Networks Sales & Solutions, is meant to help the company capitalize on its expanding and increasingly niche inventory by giving marketers an easy way to buy advertising across its network. The move effectively brings all of AOL’s revenue streams, other than subscription revenue, under one umbrella organization.

The news follows the departure last week of Lisa Brown, AOL’s former executive vice president of interactive marketing, who left the job after only eight months.

Kelly formerly served as president of global marketing at Time Warner , AOL’s parent company, where he worked with the media company’s largest advertisers on major marketing programs.

“Increasingly advertisers wanted an interactive piece in these big programs,” Kelly told this publication. “It’s a growing marktplace. There’s a lot of demand. And AOL, as the leader, really should have the most compelling product offerings.”

Kelly will now report to Ted Leonsis, vice chairman of America Online and president of the core service. Reporting to Kelly are Michael Barrett, who will head the company’s ad sales operations as executive vice president of sales and partner marketing, effectively replacing Brown. David Lebow will manage inventory and traffic operations in the new division, and hold the title of executive vice president/general manager, AOL Media Networks.

“It’s a great change,” Kelly said. “It will empower this group — which is being drawn for many different parts of AOL — to really go to market in an efficient, effective way.”

Kelly’s comments highlight the continued dissatisfaction with AOL among many interactive media buyers, who have found the company both difficult to deal with and arrogant — a legacy of its attitude during the dot-com boom. Others in the media buying community warmed to AOL’s more recent efforts to re-invent itself, though frequent re-shuffling of top executives can’t inspire confidence.

The re-shuffling also comes amidst AOL effort to morph from a one-product shop to a media entity with an array of vertical offerings. Over the past few months, AOL has introduced niche services for kids, teens, Latinos, broadband users and discount dial-up users. It’s reportedly looking at buying BlackVoices.com, an African American oriented content property. The AOL ad sales team also represents Moviefone, Mapquest, CompuServe, AOL Instant Messenger, and the ICQ messenger, along with some Time Inc. and Turner Broadcasting online properties.

AOL’s balance sheet has continued to look dismal thanks to the expiration of ad deals left over from the dot-com boom, despite the burgeoning online advertising recovery. The company says ad revenues were stable from the second quarter of 2003 to the third, and claims it’s poised for an upturn this year.

“We were actually up this year [2003] over last year [2002], and we expect to be up double digits next year [2004] over this year, so we expect to see the basic third-party advertising piece of the pie growing,” said Richard Parsons, CEO of Time Warner, speaking of AOL display ad revenues at a recent conference. “It’s not growing as rapidly as the search piece, but it’s growing and we feel very good about it.”

The new division will also handle further development of AOL’s search business, currently largely dependant on the company’s distribution of Google AdWords listings.

“We’re just beginning to realize the full potential of our AOL Search business and to introduce new commerce platforms,” said Leonsis in a statement. “By formalizing and bringing together…all the inventory and tools…to help partners reach our audience in a revived Internet ad/commerce market, we believe AOL Networks Sales and Solutions can better serve our clients and grow revenues even faster.”