AOL Revving Up for Rich Media Ad Dollars

Pieces of the puzzle designed to boost advertising sales for AOL Time Warner’s America Online unit are falling into place, with the Internet service gearing up on both the sales and technology sides to encourage clients to buy rich media ads.

Executives at the company’s Internet marketing group spent much of last month “roadshowing” the service’s long-awaited rich media capabilities to inside sales staff personnel in Dulles, Va. and New York. This month, America Online is hoping to start signing clients, aiming to have “a bunch” of creatives in development by September for deployment as early as that month.

So far, the company has initiated discussions with advertisers including American Express, Gateway , and Kellogg’s . Other clients with which America Online is in early talks include telecom and travel players, as well as a major broadcast television network.

“They have really high hopes for this,” said one executive close to the firm.

That’s not surprising, considering how America Online has lagged behind in being able to offer the same sorts of animated and interactive ads on its own service as those being offered by Web portals like Yahoo! and Microsoft’s MSN. Rich media ads typically command a higher premium from advertisers, and are thought by many to be more effective than static ads.

For AOL, which touts a subscriber base of 34 million, the hindrance to rolling out its own rich media has been the proprietary “Rainman” format on which the service’s pages are based — a name derived from the service’s Remote Automated Information Manager publishing and scripting system. While once considered breakthrough online publishing technology, AOL’s reliance on the aging system in more recent years has meant that the company’s Rainman screens are incapable of supporting even the most commonplace Web-style animation.

But AOL is soon hoping to be able to change its reputation of falling behind the times in meeting online advertisers’ needs. With the release last October of Version 7 of America Online’s client software, the company introduced limited functionality that allowed video, animation and sound to be grafted onto Rainman sites.

Now, it’s gearing up to make ads using the technology commonplace across its systems, in connection with Version 8 of its software, now in beta. In preparation for a wide rollout, America Online has been quietly deploying a number of trial runs of its new rich media capabilities, using sister AOL Time Warner brands as guinea pigs.

Earlier this year, the company ran an animated tornado on a Rainman page to draw attention to a made-for-TV movie appearing on TBS, a unit of AOL’s Turner Broadcasting division.

Another trial included animated lipstick that floated above and shrank into a picture of Oscar-winner Halle Berry in AOL’s Beauty and Fashion area — which in turn linked to Entertainment Weekly’s coverage of the Academy Awards. Still another trial aimed to promote, which is operated by Turner Sports.

“The first tests were focused on promoting editorial content,” said Sreekant Kotay, senior vice president of marketing and strategy at New York-based Viewpoint , which developed the rich media technology used in AOL Version 7.0. “They didn’t want to risk any of their paying clients … they really want to shake out all the issues from serving them and the user interface issues.”

Another player helping to develop rich media backend technology for America Online is Newport, R.I.-based Bluestreak, in which AOL Time Warner is an investor, and which will have its software included in Version 8.0 of the company’s software.

In addition to the Viewpoint tests, America Online began experimenting with other advertising formats that will make their appearance in 8.0. For instance, last month, the company began publicly testing a version of AOL Instant Messenger that featured user-configurable “themes” and backgrounds — features that will find their way into the main America Online client within months. (AOL anticipates selling branded themes to advertisers).

The AIM test also included a test of Viewpoint technology that powered a “takeover” ad. Users who loaded in a branded theme for “Eight Legged Freaks” — a feature film produced by AOL’s Warner Bros. division — were treated to an animated spider crawling out of the AIM window and across their desktops.

For America Online, the effort to better monetize its audience with rich media comes amid turmoil at its parent, driven in large part by the dwindling performance of the Internet unit. The woes brought about the forced resignation of Chief Operating Officer Bob Pittman earlier this month, and a major restructuring that saw the company’s old media executives in charge.

The thinking at the company’s Internet marketing unit is that by promoting new forms of ads, the company can command higher fees and more attention from advertisers.

“All of a sudden, this legacy 15-year-old client can play the latest types of media,” said an executive close to the company. “The folks at AOL see this as very critical for their business.”

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