AOL wants a tasty chunk of the 9 million people addicted to the massively multiplayer game World of Warcraft. Its rumored plan is to lure WOW players into AOL's clutches with a dedicated social network at its wow.com domain, dormant for years. Just one problem: Is it setting itself up for a cybersquatting lawsuit? [TechCrunch]
Microsoft's MSN portal is losing money. Lots of money. "Google's profit run-rate is $4.4 billion on $16 billion of revenue. Yahoo's run-rate is $750 million, on $7 billion in revenue. Even fellow-cellar-dweller AOL is printing cash: $1 billion profit pace, on about $2.1 billion of revenue. All those companies are making money hand over fist. Microsoft is shoveling it down a rat hole." [Silicon Alley Insider]
Erick Schonfeld follows up on Jason Calacanis's rumor via Twitter: AOL is considering a spinoff of Platform A, its new combination of its Advertising.com business and its conventional ad sales force. Why just the ad business? Online ad networks are hot, while no investors want AOL's dial-up or portal business. [TechCrunch]
AOL employees, apparently, have not lost their gallows humor in the face of what most in the industry now believe are impending layoffs. For one thing, some have taken to referring to CEO Randy Falco and COO Ron Grant as "Smithers and Burns," the curiously close assistant-and-boss couple from "The Simpsons." But also, according to one tipster, they're volunteering to tell people, falsely, that they've been laid off — a prank so successful that it may have generated the rumors of layoffs that reached our ears late last night. How the prank supposedly went down, after the jump.
Ted Leonsis, the semi-retired AOL executive, is drawing fresh attention for a blog post he wrote last week insisting that all was fine at the Internet giant, citing a raft of lofty numbers. As rumors of new layoffs have bubbled up, commenters on his blog are tearing Leonsis apart for his sunny claims of AOL's health. Leonsis's shiny, happy mantra: AOL has huge traffic. His detractors' retort: Yes, but it's stagnant or declining. Leonsis has yet to respond. Perhaps he's too busy puzzling over buddy Steve Case's perplexing new credit-card startup.
You may remember Steve Case from your spam-filled AOL inbox and your junk-CD-filled postal mailbox. The former CEO of AOL and now the head of the Revolution Health, a flailing healthcare startup, is giving it another go. His latest venture? launched Revolution Money, a nontraditional credit card combined with a PayPal clone. The former would be interesting if we didn't already have Visa and MasterCard, and the latter if we didn't have, well, PayPal. The basic sales pitch for the card is, alas, utterly flawed. Sure, it's cheaper for merchants, which may win it some acceptance among businesses. But since Visa and MasterCard make money by charging fees to sellers, not buyers, that price cut won't make any difference to consumers when they hit the mall. This obvious point is perhaps not lost on the star-studded investors Case attracted to his earlier venture.
There's not much surprise left, given the drumbeat of rumors that AOL would be pursuing mass layoffs later this year. But we now hear that layoffs have started at the Internet giant, even earlier than expected, with a number of middle managers getting the chop Tuesday afternoon. Anyone have more details on who's out, and which parts of the company are getting hit the hardest? Send in a tip. Update: At Silicon Alley Insider, Henry Blodget says the date for mass layoffs has been set for October 16. Another source says Tuesday's layoffs were mostly in AOL's international business, leaving few people outside the UK. And yet another tipster suggests that it was all an elaborate joke gone wrong.
Let the fingerpointing begin. A friend of ousted AOL advertising executive Mike Kelly takes issue with our assignment of blame for AOL's dwindling search market share. He says that Ted Cahall, the weightlifting strongman of Dulles, Va. (left) is responsible. It's true that Cahall — who is, judging by our tipsters' emotions on the subject, already widely loathed on the AOL campus — now oversees AOL Search. But Cahall only joined the company earlier this year. Kelly previously included search in his responsibilities, and from late 2005 to early 2007, AOL's search market share fell by nearly half. I'm sure Kelly has his strong points, but by the numbers, this wasn't one of them.
ABC is now offering free streams of its shows at AOL.com in an effort to expand its Web viewing audience. Viewers will be delighted to know that the webcasts will use "geo-targeting," so you'll continue to receive local ads, like that shouty used-car salesman you've grown so fond of. [Wall Street Journal]
Nokia is leaping into the mobile advertising arena with its plans to acquire Enpocket, which sprinkles mobile Web pages with video and banner ads. With mobile phones seen as one of the great unmapped frontiers of advertising, Nokia is preparing to battle with other prospectors like AOL's Third Screen Media and Google, which just announced AdSense for Mobile. Of course the big problem, as Advertising Age points out, is that consumers are hardly begging for ads on their phones' cramped screens. But advertisers are attached to the long-held vision of location-based advertising, stalking their customers through the streets, pinging them with coupons for nearby stores.
Search and ye shall find — steady employment in advertising, that is. That's the lesson I'm taking from Mike Kelly's abrupt ouster, announced today, as head of AOL's ad sales. How abrupt? Mediaweek just named him one of the 50 most influential people in advertising. If you haven't heard of Kelly, here's his resumé at a glance: A Time Inc. ad sales guy who rose to become publisher of Entertainment Weekly, Kelly was sent down by Time Warner to fix AOL's relationships with advertisers. He largely succeeded in that, and also spearheaded the acquisition of Advertising.com, an online ad network that places ads on third-party sites. Advertising.com has provided much of AOL's recent growth in ad revenues. But elsewhere, AOL's ad sales have stalled. Especially in search. And Kelly, fairly or unfairly, is getting the blame.
There's a truism that every corporate relocation, whatever the ostensible business reason, ends up shortening the CEO's commute. And AOL's Randy Falco has accomplished that much. By moving AOL's headquarters from Dulles, Va. to New York City, he's able to stop diverting the company jet to White Plains and go back to getting driven into Manhattan. Oh, sure, New York is a better location for an advertising-driven business. With the collapse of AOL's dial-up Internet business, Dulles's network operations are less and less important. Falco has much else to say in an internal company memo obtained by Valleywag. The full memo is printed after the jump, and I'll be back with more analysis of AOL's big changes.
AOL's Digg clone, formerly branded as Netscape and already pronounced dead, will be rebranded as Propeller. The announcement came from Tom Drapeau, the head of AOL's Netscape division since Jason Calacanis's brief tenure. Muhammed Saleem, a Propeller editor né Netscape Scout, thinks technology sites should be eating their hats for the grave predictions. Maybe the site would have had a chance at life and competed with Digg, the social news site, if it had launched with original branding instead of misusing the name of the already-dead Netscape. But AOL angered and turned off a loyal community when, under Calacanis, it killed the original Netscape and, after Calacanis's jealous pursuit of Kevin Rose, its own Digg clone — even if the sites ignominiously remain on life support and AOL refuses to accept that its time to pull the plug.
Tom Drapeau, the current head of Netscape at AOL, is finally admitting that Jason Calacanis's jealous attempt to clone Kevin Rose's Digg was a failure. Sort of. Calacanis, who left AOL earlier this year to launch Mahalo, an also-ran Web directory, had hoped to persuade Netscape's loyal but dwindling base of users to embrace Digg's social-news model, where users submit headlines and vote on them to determine their ranking on the site. Drapeau confirms what TechCrunch predicted weeks ago — after initially denying it: Users do not want the Netscape brand associated with Calacanis's social-news experiment. But Drapeau continues to stubbornly insist that Netscapers "remain committed to delivering a compelling social news experience for our users." They just don't know when the site will be available, what it will be called, or what they'll do with it.
Time Warner's troubled Internet unit, having resorted to me-too strategies in search, copying Google, and in portals, copying Yahoo, is now copying itself, going back to its old ways of mass layoffs. At Silicon Alley Insider, Henry Blodget crunches the numbers on various layoff scenarios. And here's the thing: It's not like AOL is losing money. Far from it. It's simply not as obscenely profitable, as, say, Google, which is adding employees as fast as AOL seems to be shedding them. A layoff of a quarter of its staff would lift AOL's profit margins from 39 percent to 52 percent, Blodget estimates. Given the constant dwindling of its Internet-access business, and the uncertain growth of its online advertising sales, cutbacks, while regrettable, seem logical. Let's just not pretend Time Warner's doing this to keep AOL alive; they're doing this to keep AOL gushing cash.
Broadcast network NBC has inked promotional deals with almost every major Internet player to distribute the pilot episodes for its new fall lineup. Almost, that is, because it appears to be shunning Google's YouTube online-video site, as well as the News Corp.-owned MySpace. According to The Hollywood Reporter, episodes of new shows "Chuck," "Life," and "Journeyman" will be available for download on Amazon beginning September 10. If you'd prefer to download using Apple's iTunes software, sign up for the Apple Students group on social network Facebook. Members of that group get a one-week headstart on downloading the pilots. Prefer to stream your entertainment? Beginning in mid-September, you can catch "Life" on AOL, "Journeyman" on MSN, and "Chuck" on Yahoo. But it's the omissions that are really interesting.
Patricia Santangelo made headlines as the first person to go to court with the RIAA instead of timidly settling charges of copyright infringement. In April, her lawsuit was dismissed. But instead of quietly forgetting the entanglement, the RIAA decided to go after Patricia's children, Michelle and Robert, for alleged illegal file-sharing. Now for the fun twist. The Santangelos are looking to name Kazaa operator Sharman Networks and AOL, the family's Internet service provider, as third-party defendants in the case Elektra v. Santangelo.
