SEPTEMBER 6, 2006

Anatomy of a Brand

By Abram Sauer

AOL—Crashing

The Internet service provider's declining fortunes may serve as a cautionary tale, but redemption isn't out of the question

In 1985, the same year Quantum Computer Services (now AOL) was incorporated, the film "Brewster's Millions" hit theaters. In a nutshell, the film follows the folly of a man given US$ 30 million with a mandate to make it disappear in 30 days with nothing to show in its place; plus he can't tell anyone what he's doing. The symbolism shouldn't be lost on anyone familiar with the story of AOL. (Conspiracy theories have emerged detailing how parent company Time Warner may be secretly scuttling AOL in an attempt to screw Google.)

The fine details of AOL's afflictions will not be re-re-re-re-counted here except to say that the company went from being worth around $200 billion in 2001 to an estimated $20 billion today. (AOL values based on estimate and raw guess partly attributed to Google's purchase of five percent of AOL for $1 billion.) It's like the US becoming as economically powerful as Spain by 2011, or similar in dramatic plummet to Britney Spears' Q rating. From its high of over 30 million subscribers, AOL now claims somewhere under 19M; it estimates a loss of another six million within the year. And it gets worse.

Arithmetic anguish aside, AOL has become the benchmark for what public relations professionals mean when they use the term "PR nightmare." Last year saw customer retention based legal woes (and settlement), along with the "Vincent Ferrari" incident, where AOL's aggressive customer retention practices were exposed to the world in an endless loop. These events were joined by an unintentional leak of AOL's customer retention manual and an intentional leak of thousands of AOL users' private search results. There was one silver lining: AOL's announcement that it would reduce reported earnings going back to 2000 as part of an accounting discrepancy settlement with the US Securities and Exchange Commission was overshadowed by news that three AOL employees, including the chief technology officer, had been fired. AOL's intention to permanently "log off" about a quarter of its workforce in the next six months complements public calls for chief executive Richard Parsons' resignation. All these events happened in about a year. That's how it's been for AOL.

But here's the really big downer. AOL's brand demise is nearly impossible to use in any white-paper way to educate or warn others about how to avoid a similar fate. The brand seems to have grown and prospered by the same whimsical approach that it is also collapsing under. Call it part time-and-place, part folly — he ups and downs don't seem to be fully under the control of the brand, making "turn of fortune" capricious. If one were to try to use this Greek tale as a lesson, one can imagine bullet-pointed PowerPoint slide after slide detailing a lucky or obtuse AOL event followed by a respective slide with King Kong font face reading "BUMMER" and "DUH!"

And yet there is always hope for resurrection.

Even though AOL has given up on "America" (having officially changed its name to AOL), it is possible America has not given up on AOL. Indeed, is there any nation more tied to the idea of redemption than America? AOL's potential for redemption begins with recent strategy announcements that it will eliminate its "walled garden," or private subscribers-only portal. As an open premium content provider and search portal, the company will join the ranks of MSN and Yahoo! To this end it has been shrewdly snapping up like-minded companies and signing exclusive content agreements with entities like Hello! magazine.

AOL's original success, by design or providence, was based solidly on the naiveté of web users. If it figures to tie the future on the same assumptions, its obituary can probably be put into the rush-to-publish pile right now. The idea of AOL (or any portal) as a user's only conduit to experience and find online content is dead. If AOL is to cheat death, it will need to embrace the idea that its users are far past the idea of needing an Internet nanny to help them through this crazy, newfangled computery thingy.

The good news is that AOL has shown some promise at joining the here and now. If the brand has a future it may well be as a wizard working behind the curtain, toned down in visibility. The AOL joint venture TMZ.com has extraordinary traction. Covering celebrity in the worst (meaning best) possible way, TMZ has created a name for itself by breaking stories like the Mel Gibson drunk-a-thon and the "firecrotch" incident, a vapid encounter between two self-absorbed celebrities caught on video discussing the potential flammability of a third. TMZ shows that it's possible AOL does actually understand the way, the why and the what of Internet users today.

If AOL can meet Internet users' expectations with content that is engaging and relevant, and with functionality that is credible and secure, it has a chance to continue. Example? In the year of AOL's launch, there was another entertainment event of note: the broadcast of the first Live Aid concert. Twenty years later, AOL's live online broadcast of the 2005 Live 8 concert was an unqualified success. Symbolists (read: shareholders) may find this connection more appealingly optimistic.