June 18, 2005
AOL Advertises on Competitors to Get Traffic to AOL.com
To build traffic for AOL.com, AOL is buying search ads on Google and Yahoo. The article says:
"AOL had initially considered spending as much as $50 million on television ads to promote the portal. But that changed after the company noticed that the biggest source of traffic to its free music site was free and paid listings on other search engines.
'We started seeing the results and said, 'Oh, my God, what if we took this money and put it into search engine marketing,' ' Mr. Miller said. Now more than half of AOL's marketing budget for the portal will be used to pay for ads on search engines and formatting Web pages so they appear in the free search results."
The article then continues:
"Both Google and Yahoo said they were happy to take AOL's money for ads on their search pages."
Yeah, I would too. Take the money now while a customer is spending like a drunken sailor. It provides a nice ride for a while although, sadly, the gravy train will come to an end.
However, taking the ads is a little odd. It's like ABC or NBC taking commercials for a CBS TV show, or a radio station taking commercials for a competing radio station. It definitely prompts competitive concerns, but my attitude is--if someone is buying free drinks for the house, why not enjoy a cold beer? Unless AOL has something special to hook Google/Yahoo users (and I haven't seen it), Google and Yahoo have nothing to worry about.
The article also discusses another strategy to get new AOL.com customers. As the article says, AOL plans to:
"find users from the more than two million people who cancel their AOL Internet access subscriptions each year. When a user calls to stop service, AOL's phone representatives will offer them a way to keep their e-mail addresses if they agree to use AOL's new free e-mail service at AIM.com."
In other words, AOL is losing so many customers, their key source of non-paying customers will be their former paying customers. This is a good thing?! Given AOL's desperation, there's only one possible direction for AOL to go. It's not up.