Tacked to the newsroom walls in AOL’s downtown Manhattan headquarters are pages and pages of Web traffic data. The numbers tell the growing number of journalists who work there how well their articles are performing and—thanks to the ads that appear alongside them—who’s paying the bills.
Judicious use of Web-analytics software is a hallmark of what AOL Senior Vice-President Marty Moe calls the “newsroom of the future,” a large and growing news gathering operation at the heart of AOL’s turnaround effort. As demand dwindles for the dial-up Internet service that made AOL (AOL) a tech powerhouse in the 1990s, Chief Executive Tim Armstrong wants to jump-start growth by creating original online content and selling ads to appear with it.
To succeed, Armstrong, who will complete his first year at the helm in March, is leaning on AOL’s background in technology. Rather than merely craft articles and passively post them on the Web, as many newspapers and magazines do, AOL is using software to determine which articles to write and then give journalists up-to-the-minute data on how much traffic those articles generate. It helps the journalists collaborate in low-cost ways, too. “We really want to enhance journalism with technology,” Armstrong says in an interview. “We feel like we have a strategic window to invest in quality content.”
AOL has hired more than 500 full-time journalists, many of them veteran reporters and editors seeking refuge from the business implosion in print journalism. The company also buys material from more than 3,000 freelance contributors. As AOL becomes better known for creating its own “quality content,” advertisers will pay more to put their advertising on its pages, says Armstrong, former head of U.S. ad sales at Google (GOOG). “Brand ads should be a lot bigger on the Internet today and I think it’s going to take hard work and creativity.”
Armstrong, who led AOL through its spinout from Time Warner (TWX) in December, hasn’t said how much ad revenue he expects from the news operation. But he signaled his commitment to beefing up news when he largely spared journalists from a round of 1,400 job cuts in January. “The journalism enterprise was not affected at all,” says Moe.
Startups such as Huffington Post and TechCrunch are similarly attempting to build online media companies from the ground up. Few, if any, are trying on such a grand scale. Media behemoths, meanwhile, are still struggling to find profitable ways to translate print operations to the Web. “The way is open for AOL to innovate,” says Jay Rosen, a professor of journalism at New York University.
AOL will need to persuade Wall Street that it can succeed where others have failed, says Mark Mahaney, an analyst at Citigroup (C). “The market is skeptical that they’ve got a new mousetrap here,” Mahaney says. Since it began trading publicly in December, AOL’s stock has hovered near its opening price of 25.07. On Feb. 3, AOL reported a fourth-quarter profit. Still, the editorial operations are likely losing money, Mahaney says. Ads account for $471.6 million, or about 58% of the total. On Feb. 19, the stock rose 72¢ to 25.15.
BusinessWeek.com
