After Merger, America Online Revs Up Advertising

Whether it’s on television, on the street or online, escaping America Online isn’t easy these days.

After a three-year lull, the online giant has dramatically ramped up advertising spending in an attempt to burnish its brand, plug new products and tout its January merger with Time Warner.

On CNN recently, commercials for AOL and the new AOL Time Warner (which owns CNN) aired nearly every 15 minutes. Internet promotions for AOLTV and AOLbyPhone are ubiquitous on the online service’s proprietary site. Always a marketing innovator, AOL recently paid the U.S. Postal Service to put its “You’ve Got Mail” slogan on 10,000 delivery trucks in major cities.

Though it hasn’t been a big advertiser in recent years, AOL’s budget for television, print and radio ads mushroomed 68% during the first 11 months of 2000, according to Competitive Media Reporting, a New York firm. The company spent more than $118 million in 2000, more than double its annual spending in 1997 and 1998.

Self-promotion on the AOL site also is growing. In February, AOL ran an average of 631 ads per day for its own products and services, ranging from the AOL AAdvantage rewards program to the AOL Platinum Visa card, according to Leading Web Advertisers, an online ad-tracking firm in New York. Four months ago, AOL ran about half as many ads for its own products, Leading Web estimated.

Promotion of newly acquired Time Warner properties rose too. The number of ads on the AOL service for Time magazine jumped to 184 in February from 56 in November. Ads for Cartoon Network, another Time Warner property, rose to 133 last month from 46 in November, according to Leading Web.

AOL would not comment on its annual advertising costs, but the company reported in recent financial statements that its sales and marketing expenses rose about 40% in the second half of 2000, chiefly because of brand-related advertising. AOL officials play down the increase, noting that the company has introduced a variety of products in recent months, including AOL 6.0, AOLTV and AOL Mobile Communicator, a text-messaging device.

“In a short period of time, we’ve gone from just AOL, which was really one product, to being a multi-brand company,” said Jan Brandt, AOL’s chief marketing officer. “It’s really about letting consumers know who we are.”

Marketing experts say the renewed emphasis on advertising--particularly television commercials promoting the new AOL Time Warner--may be an attempt to impress Wall Street and give the company’s sagging stock price a boost.

“They need to communicate the success of their business to Wall Street and investors,” said Debby Goldberg, vice president of marketing at Interbrand, a New York brand research firm. “It’s an important audience, just as important as consumers.”

By emphasizing the new corporate entity and its stable of familiar media and entertainment properties, from People magazine to Warner Music, AOL hopes to convey an image of diversity, strength and integration, experts say.

“They are doing what most Internet companies are doing right now: trying to stake a claim as a true media company, rather than just an Internet portal,” said Ron Cappello, president of Enterprise IG, a New York brand consultant. “The message is: We’re big. We’re diverse. And we touch your lives in more ways than you know.”

Cappello agreed that the increased ad spending was probably part of the company’s efforts to woo Wall Street, both during and since the merger. Shares in both AOL and Time Warner fell dramatically last year, and stock in the new company has been losing value in recent weeks, closing Monday at $43.80 a share, down more than 40% from its high last year on the New York Stock Exchange.

The campaign may also be targeted at reinforcing the AOL brand and keeping membership growth strong. Though AOL is one of the most-recognized names on the Internet, there are signs that the brand may need a little polishing. In an international ranking of brands by Interbrand, AOL slipped from 35th place in 1999 to 47th last year, behind Yahoo (which ranked 38th) and tied with Amazon.com.

Three of the four television commercials now airing nationwide tout AOL’s popularity, ease of use and new features. “So easy to use, no wonder it’s No. 1” is the company’s current advertising mantra. Such advertisements are helping fuel the continued growth of AOL membership, which rose an additional 30% last year to nearly 27 million.

Brandt said the company’s recent ads resulted from a long-planned strategy to promote new products and do not signify an increased reliance on advertising or an attempt to impress Wall Street.

“We don’t do mass-market advertising to reach Wall Street analysts,” she said.

But she added that the recent advertising activity might appear stronger because AOL had slashed its ad spending beginning in 1997, after the company began offering flat-rate pricing and could not keep up with consumer demand. Under a settlement with attorneys general in several states, AOL agreed to halt its national ad campaign.

Although the company quickly resolved the demand problem, AOL hadn’t resumed an aggressive advertising schedule until recently.

Brandt stressed that advertising remained a relatively small part of the company’s overall sales and marketing budget, which grew to $1.2 billion last year. Instead, AOL has relied heavily on direct marketing, such as mailing free software discs to consumers or inserting them in magazines and other products.

Brandt also emphasized the hundreds of co-branding deals that AOL has signed with other companies. In exchange for advertising on the AOL service, companies such as Target, Sears and Circuit City agree to promote the AOL brand in their stores or in their own ads. For example, AOL frequently piggybacks on other companies’ TV commercials because partners must include the “AOL keyword” in their ads. Even news anchor Dan Rather is obligated to occasionally direct viewers to an AOL site under a marketing deal with CBS, she said.

“We’re not paying for that. It’s part of the partnership,” Brandt said. “We’re seeing now the continued fruition of the co-marketing programs we have out there.”

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AOL’s Ad Blitz

Advertising spending at America Online is at an all-time high as the newly merged media company AOL Time Warner promotes its image and products.

*

Television: $92.4 million

Print: $24.9 million

Radio: $1.2 million

* January through November

Source: Competitive Media Reporting