Media buyers and planners generally favor anything that promotes competition. And so when AOL announced last week, as had long been anticipated, that it was switching its mission from subscription internet service provider to free content provider, many media people were pleased. Instead of relying on subscriber fees, AOL will move to an ad-supported model that offers free email, parental controls and content. That sets up AOL.com to compete against other portals like MSN and Yahoo, and it gives media people another choice to reach the desirable online audience. Indeed, AOL’s reach even before its services became free is impressive: The week ended July 30, the site ranked No. 5 on the web with more than 48 million unique users. Yet with the questionable ad deals made and numbers promoted by AOL during the early dot.com years still remembered by many media people, and less than a quarter of AOL’s second quarter dollars coming from ad sales, the company still has lots of challenges ahead. Jeff Marshall, senior vice president and managing director of Starcom IP, the digital media division of Starcom, talks to Media Life about what the new model means for media people, why MySpace is suddenly an AOL competitor, and whether the company has cleaned up its image over the past six years.

 
What does the new free model mean for media buyers and planners?
 
The way I look at it is it’s going to create better advertising opportunities than they’ve offered in the past. They’ve always had great audiences and decent content, they’ve just been missing the notion to create better platforms for advertisers.

When their subscription base was so high, there wasn’t any incentive to do this. It’s an exciting time for advertisers because they’ll have another sizable option that will be much more flexible, creative and service-oriented than before.
 

In some ways, AOL is coming late to the ad-supported media arena. What impact will they have in competing against MSN, Google, Yahoo and the like?
 
It’s not that they’re coming in late. Before they had the space to sell, and they would put ads in that space, but that’s not the way the future of marketing works. It needs to be much more targeted and more data-informed, you want to understand your target audience and their behavior.

They will continue to play catchup with regard to ad budgets, but they’ll do so quite quickly if they deliver what they need to, and a huge motivator is the revenue gap.

It’s a very motivated organization that has the audience and has the content.
 

What is the biggest challenge facing AOL?
 
I think the legacy of technology systems and people in their organization need to change rapidly.

I’ve seen better technology implemented and new sales people come on board. As long as they continue to show aggressive movement in that direction, they’ll be fine.

It’s a cultural change, it doesn’t happen over night. It’s driven by having the right people in place.
 

What sort of users should the company be courting?
 
I think that the legacy audience they have are the late adopters.

If you look at the nature of their business, it was mainly dialup, and that’s why they’re losing subscribers—those subscribers are switching to broadband. From an existing subscriber basis, it’s more these late adopters. If you look at their content it has a broad appeal, and that’s what their brand used to represent.

I think they have the brand that represents a broad-based appeal, and that’s the role of a portal if you’re looking for a mass audience. It becomes: Invite everybody in, then have the solutions to separate the audience in a way that’s appealing to advertisers.
 

How risky of a move is this for AOL? Is it good to see chances like this being taken, or do you think it could be a disaster?
 
I think it’s a risky move for overall revenue when you abandon subscribers. You do the math. That’s a lot of revenue that needs to be made up through advertising.

But I don’t think it’s risky considering the notion that they don’t really have a choice. One person might say they’ll give up revenue, but I’d say they don’t have a choice, they’re going to lose that revenue anyway.
 

In positioning itself more as a free portal, will AOL also be competing against MySpace and other social networking sites? If so, how can it go after younger users?
 
Absolutely. The nature of this is they’re basically competing with everybody, anybody with large audiences.

They’re going to appeal to the movie company, car company, or whoever wants to reach millions of people overnight. There’s very few sites that can do that.

But also, if you think about what aggregates to create AOL, it’s a lot of vertical or content-specific content or sites. So you’ll still have the ability to specifically target kids, or men, or women or whatever demo you want. AOL Sports will compete with ESPN.com, for example.

AOL in essence, similar to Yahoo and MSN, competes with everybody.
 

What's your opinion of the new Mark Burnett offering on AOL, "Gold Rush?" Do you think original content like this has the potential to draw in new users? Or is it much ado over nothing?
 
I think that people are continuing to try and figure out what role the internet as a distribution point is going to play. The lowest common denominator will continue to be television, a video platform. If you’re looking to break out hits, it’s very difficult to see something take over, say, “American Idol” online.

What the U2s of the world have proven, there’s a desire to consume video online. But the connection that hasn’t been made yet is Hollywood-style production online.

Online versus TV lines will be blurred, but over time it’s probably going to be some sort of combination of the two.
 

Are advertisers still at all wary about AOL after the creative accounting deals of the early dot.com boom? Or has the company scrubbed its reputation clean?
 
I think AOL’s made a lot of progress in the last 12 months with their product offering. And as long as they continue to improve, advertisers will either grow or reopen their relationships with AOL.

I think they continue to have a very attractive audience and an ability to scale that audience, and that’s very hard to ignore.