Yahoo-AOL: An integration nightmare on deck

Ed: We’ve noted the execution challenges for Yahoo and AOL. The combination creates a nightware that is multiplicatively worse. 400 engineers at Yahoo combined with equal numbers from AOL – like the elections – it’s a cacophony of voices without clear leadership. Dangerous.

Boomtown’s Kara Swisher reports:

Now, sources tell me, the circle of executives at both companies interfacing with each other has been widened, for purposes of due diligence. That includes Yahoo CEO Jerry Yang, who is indeed in New York this week–where AOL parent, Time Warner, is located–to meet once again with its CEO Jeff Bewkes and see if they can actually complete the merger.

Swisher then has a strong analysis on the management teams and how they might fit together. Henry Blodget tosses in the financial analysis(assuming Yahoo shares can hold it together long enough to do a deal). But once the headlines are dry and all the moving parts are dissected the real work begins. How are these assets and information systems going to be combined?

Something tells me Michael Krigsman at IT failures is going to be busy.

Why the pessimism?

Yahoo in April outlined its open strategy, which is about collapsing its internal data silos as much as it is about becoming a platform. Simply put, Yahoo has its share of applications running amok since its various business units used to run more or less independently.

Now toss in AOL’s assets. AOL was built via acquisition and each company acquired–Bebo, Advertising.com, Quigo etc.–all had their own information systems. Now take that hodge-podge and connect it at the hip to Time Warner’s systems. Talk about legacy apps.

Once you map the various IT systems and their connections at AOL and Yahoo you’ll have some ugly whiteboard art.

But all of that mess is behind the scenes. You can pretend that rat’s nest doesn’t exist–at least for a while.

What about the advertising systems?

• Yahoo brings RightMedia, APT, BlueLithium and Panama.
• AOL brings Platform-A and its subsidiaries– TACODA LLC, Quigo Technologies, ADTECH AG, Third Screen Media, Advertising.com and Perfiliate Limited.

Adding those ad networks together will get share, but can Yahoo-AOL integrate them in a way that works for advertisers?

Simply put, the Microsoft-Yahoo integration looked cleaner.

The ad networks and internal systems are just two of the most obvious pain points. The actual management teams that will carry out the integration are another issue (many projects fail due to inept management instead of technology).

A Yahoo-AOL combination is going to lead to a management bakeoff internally. And unfortunately, Yahoo and AOL are used to it. How many reorgs have occurred in the last two years at both places?

Toss in the fact that neither AOL or Yahoo are exactly running to the altar. They are being pushed together. Yahoo is trying to keep its stock price from heading to single digits and Time Warner just wants to unload AOL to anyone it can.

Add it up and you don’t have the makings for a smooth integration process

Larry Dignan is Editor in Chief of ZDNet and Editorial Director of ZDNet sister site TechRepublic. See his full profile and disclosure of his industry affiliations.

AOL: Now Our Ad Network Business Is Seizing Up, Too (TWX)

This is going to make it harder for Jeff Bewkes to get the price he wants for his wobbling AOL unit: An admission by CFO John Martin that the Web company’s ad revenue is sputtering. Bloomberg:

“It had been growing like a weed,” Chief Financial Officer John Martin said today at a Merrill Lynch & Co. investor conference in Marina del Rey, California. “We have seen some cancellations. It gives us pause in terms of our confidence to ramp advertising in the back half of the year.”

Martin’s spin, spelled out in the WSJ’s coverage of the talk (which non-subscribers can get free on their BlackBerrys), is that the slowdown is worst at AOL’s third-party ad network business (Platform A), so the effect on margins won’t be as bad as it could be. What he apparently didn’t spell out is that the ad network has been the one growth engine AOL has been able to count on in recent quarters – its owned and operated ad business, which is indeed much more profitable, has been in free-fall. So the next quarter could indeed be grim.

Of course, this is also bad news for the rest of the Web business, especially the one-million-and-counting ad networks that have sprung up in the last year. Ad networks were supposed to be particularly resilient to an overall ad slowdown. In theory, advertisers looking for bargain space were supposed to come flooding to the networks, which link them up with publishers’ less desirable inventory. And if a top-tier player like AOL can’t make it work, look out below.

AdMob: iPhone Internet Use Sees Major Growth Spurt in August

According to the latest data from mobile advertising company AdMob, traffic from Apple’s iPhone on AdMob’s advertising network almost doubled in August. Apple’s iPhone saw the fastest growth of all smartphones worldwide, closely followed by the Samsung Instinct. It is also noteworthy that the top 5 smartphones in the U.S. generated 54% of all smartphone traffic.

The iPhone is now responsible for 7.8% of all smart phone traffic in the U.S., up from 5.2% last month. It’s important to note that this does not necessarily reflect the actual market share of the iPhone, as iPhone users, thanks to the ease of use of the iPhone user interface, are probably spending more time online on their devices than most other smartphone users.

What About Nokia, Palm, Motorola, and Rim?

While Nokia devices were responsible for just over 62% of all smartphone traffic worldwide, none of Nokia’s smartphones ranked in the top 20 in the U.S. Palm’s Centro, on the other hand, looks like a major boon for the company, as it is only trumped by the Blackberry Pearl when it comes to traffic volume.

Motorola, which does not have a single smartphone ranked in the top 20, still dominates the mobile traffic rankings with its RAZR V3. which was responsible for 3.7% of all mobile Internet use worldwide in August. The iPhone was the 17th most used phone on the mobile web and generated 1% of all worldwide traffic, up from 0.6% in July.

The iPhone is clearly growing quickly in the U.S. and now that Apple seems to have gotten its supply chain under control, chances are that it will continue on this track. However, it is also important to point out that, in the overall market, Apple is still only a small player. Most users, according to AdMob, are still accessing the mobile web on a RAZR.

Time Warner Profit Drops on AOL, Magazine Ad Revenue

Time Warner Profit Drops on AOL, Magazine Ad Revenue (Update3) 

By Gillian Wee

Aug. 6 (Bloomberg) – Time Warner Inc., the world’s largest media company, said second-quarter profit dropped 26 percent on lower earnings from the AOL Internet unit and Time Inc.’s magazines.

Net income fell to $792 million, or 22 cents a share, from a year earlier, when tax benefits and the sale of a books business boosted results, New York-based Time Warner said today in a statement. Sales rose 5.2 percent to $11.6 billion, topping the $11.4 billion average estimate.

AOL dragged on the results with the loss of 604,000 Web- access subscribers, and Time Inc. reported a 9 percent drop in advertising revenue. The addition of 251,000 phone customers at Time Warner Cable Inc. helped drive sales growth, along with revenue increases at the TV networks and the Warner Bros. film studio. Overall operating profit was little changed.

“AOL and publishing came up a little bit short,” said Chris Marangi, a fund manager at Gamco Investors Inc. in Rye, New York, which owned 11.7 million Time Warner shares as of March 31 among its $28 billion in assets.

Ad sales at AOL rose 2 percent to $530 million, missing Marangi’s 3 percent estimate. The unit’s third-party ad network and revenue from a partnership with Google Inc. offset a 14 percent drop in display ads that appear on Web sites.

Difficulties in integrating acquisitions also hurt AOL’s results, Time Warner Chief Executive Officer Jeffrey Bewkes said today on a conference call…

Time Warner’s AOL `Nightmare’ May Worsen on Slowdown

Time Warner’s AOL `Nightmare’ May Worsen on Slowdown (Update3) 

By Gillian Wee and Tim Mullaney

July 21 (Bloomberg) – Time Warner Inc.’s struggle to sell AOL is putting more pressure on the media company’s stock price as an advertising slowdown spreads to the Internet and the pool of potential buyers shrinks.

…

Time Warner, the world’s biggest media company, has fallen 13 percent this year in New York Stock Exchange trading on investor concern about the economy and the outlook for advertising. That adds to an almost 70 percent slide since AOL bought Time Warner for $124 billion in a 2001 takeover that sparked $100 billion in writedowns and shareholder lawsuits.

The value of AOL’s ad unit, along with its declining dial- up Internet-access division, has dropped to less than $10 billion from around $15 billion two years ago and will fall further, said Richard Greenfield, an analyst at Pali Capital in New York…

No Takers

His assessment differs from that of Morgan Stanley analyst Benjamin Swinburne, who said last week that the market’s $10 billion valuation of AOL’s ad business may be too high and isn’t reflected in the share price. Getting more than $3 billion to $4 billion for the unit would bolster the shares, New York-based Swinburne said in a July 17 note.

Philippe Krakowsky, an executive vice president for strategy at ad company Interpublic Group of Cos.; Lance Maerov, a senior vice president at WPP Group Plc; and Rich Stalzer, president of IAC/InterActiveCorp.’s advertising solutions group, said they aren’t interested in buying AOL’s ad businesses…

AOL Launches New Personal Finance Site, Image Gallery—But The Brand Is Absent

from paidContent.org by David Kaplan

Despite shifting focus to an ad-supported business and ad network years ago, AOL (NYSE: TWX) can’t seem to shake the image of being known as that dial-up ISP. So rather than continue to fight, AOL is finding that it might just be better to erase it, or at least downplay it somewhat. Case in point: two new channels, a personal finance site called WalletPop and a free professional images site, Pixcetera, debuted this morning—both without the AOL brand prominently featured on its site (scroll way down) or in the URL. That said, the sites do have the same look and feel of others and AOL’s main page features a link that does connect directly to WalletPop—but the link only says “Money” and doesn’t identify the site by name. As AOL continues its site rollout—the company is in the process of creating a new one aimed at younger women for launch later this year—expect the AOL name to be less and less prominent as the portals become less popular in the minds of users. More details on WalletPop announcement is here.

Garcia Media: Learning from online adverts to add “silent ads” to print

from editorsweblog

Previously thought to be separate from each other, advertising and editorial content are now finding common ground, Garcia Media reported. Newspaper web sites have created “silent ads” that are subtler and seem to blend in better with articles. 

Essentially, “silent ads” are those that are positioned in the center of summaries, navigational features and briefs columns. In this way, the ads have a better chance of being noticed because these areas tend to have heavier traffic.

These ads usually feature only a brand’s logo, without any message or text. On the web, there is a link, whereas in print “it is a matter of recognition”, Garcia Media wrote. 

Garcia Media mentioned the best ways to use the “silent ads” are:

-In vertical columns that make use of “finger reading” (e.g. navigational units)
-Between elements, avoiding the very top or bottom
-Using ads smaller than 1.5 inches

Although the ads are popular in Europe and Asia, the US hasn’t quite caught up with the trend yet.