A leaked memo to employees from Kevin Conroy, executive vice president of products and marketing, was published Thursday on TechCrunch. Conroy gave employees an update in which he said the company is "sunsetting" underperforming offerings and instead focusing on driving growth for products that "most effectively contribute to the financial health of our company."
"Bluestring, Xdrive and AOL Pictures will be sunset," Conroy wrote in the memo to employees. "These consumer storage products haven't gained sufficient traction in the marketplace or the monetization levels necessary to offset the high cost of their operation. We have found that building media management applications within the context of a social experience is a more rapid and effective way to grow the business."
Conroy said that for the company to effectively grow the XDrive online storage business it would need to focus on subscription revenues vs. monetizing through advertising revenue, which it doesn't want to do. XDrive provides storage for Bluestring, AOL's media sharing service that was launched last year. The company acquired XDrive in 2005 for an undisclosed amount.
"This business model is not in strategic alignment with our company's goals. We are exploring plans to migrate our user's assets to ensure the best possible transition experience," Conroy said.
Actually, "sunsetting" unproductive businesses is nothing new for the company, according to the AOL source, who said that last year the company shuttered 50 underperforming products.
"The company realized that over the last 10 years it was great at launching new products, but not so good at getting rid of the lackluster ones," the source said. "We realized that we needed to cut our losses and get rid of the underperformers."
In his memo, Conroy also said that MyAOL is set to finish its HP deployments by the end of October and will "transform" the MyAOL platform from proprietary to industry open standards. Conroy said that the team will provide ongoing platform maintenance support for its 70 plus HP partner sites, but seemed to indicate that the company would not go beyond those efforts.
AOL had previously signed a global agreement with HP that named AOL as the default page on the browsers of some HP computers.
In the mobile arena, AOL will "halt further investment in AIMWorld and will sunset MyMobile next year" and instead put more focus on its core revenue producing products, such as mail, messaging, portal and mapping. In addition to the core products, Conroy said that the company will concentrate development for key devices such as iPhone and Blackberry. AOL also plans to leverage open services through OpenMobile for third party mobile developers to create new applications which he said will further distribution "without additional internal development costs."
While the AOL Video Portal "has seen significant success in growing organic search traffic to about 15 million SEO referrals per month," Conroy said, AOL believes that it can grow greater advertising revenue through a merger of the video portal with AOL Programming Video Experiences. The project is already underway and is slated for completion by early fourth quarter.
Conroy also said that there AOL is aggressively seeking revenue growth opportunities through Toolbar, where the company plans to accelerate the distribution and monetization of toolbars to drive revenue from search and recirculation.
In addition, the company plans to focus on growing its bread and butter e-mail service by pursuing distribution deals through new ad inventory, such as Quigo (an automated contextual ad serving system), ad packaging, sales strategy development and co-branding partnerships and open services.
Finally, AOL said it will concentrate on growing Truveo, its video search engine. Plans call for AOL to monetize 50 million-plus UVs Truveo receives monthly through its O&O software site and APIs through a phased approach that includes banner advertising on the site and expanding API development.
"In the past few years the shift has changed from AOL being a subscription-based IP business to a Web-based advertising business," the AOL source said. "Shedding these businesses is part of that plan."
For his part, Conroy noted that at one time AOL's well-performing products compensated for underperforming offerings, but said that the company could no longer rely on this business model.
"The realities of the industry and market shifts in online advertising no longer make that possible," Conroy said. "Simply put, every product makes a direct impact on our bottom line. With two quarters behind us, it is fair to say that results across the AOL products team have been mixed. And while I expect 2008 to finish stronger than it started, the current situation is that some of our products are doing very well while some continue to struggle."
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