AOL Search – a case of sincere flattery, but a bad business decision?

First, let me congratulate the AOL team on its latest acquisition, Tacoda. I think that since Randy and Ron have taken the helm, the acquisitions to continue to fill out the advertising infrastructure have been logical and done at sane valuations. At this point, the non-search related portions of AOL are as strong as any of the other majors, and you could even say that continues to be the best-in-class player out there in the display ad network arena.

That said, while there are a number of really good things occurring, the recent decision to clone the Google search UI is one that I think needs a major revisit.

A brief history of AOL search for the uninitiated: AOL did a deal that, in Mid 2002, swapped out the prior Inktomi-powered search experience with a Google-powered one. The deal was a seminal one for Google, garnering them a lot of US search traffic at a critical time in their history (remember the more dominate position that MSN and Yahoo had in search in prior years).

The nature of the deal involved really favorable economics, as well as warrants in the pre-IPO Google. The deal did, however, have a number of constraints on what AOL could do to customize the Google search experience. The deal was a good one – AOL had much more flexibility than any other Google partner to-date, but even with that flexibility, it was probably correct to paint a picture of AOL being able to build a creative veneer around the core Google results, but not much else.

Well, the search team, led by Jim Riesenbach, Gerry Campell and Mark Canon, actually did a really great job, given the cards they were dealt. They did a number of things to allow for creative monetization of high-value searches, and built an underlying architecture that allowed real-time mixing of a number of external feeds, published in a customized template for each category of search terms. They were able to serve up the results with very little latency, given all the pre-processing they were doing. Overall, a nice piece of work. They also championed the selective use of editorial results in the header of popular searches (later copied by others), giving users really good payoff in the top half of the initial results screen displayed.

The growth in search-related ad revenue was pretty dramatic under their watch, but they knew that they had to test moving further out on the efficient frontier of “veneer design”, if AOL was ever to establish its own unique voice in search.

Their last major release (started long before their departures) was AOL FullView, which built on all their prior learnings/feedback on everything from consumer lukewarm acceptance of clustering, to the navigational issues of excessive reliance on horizontal tabs to toggle between result set types (text, image, video, etc.)..

Here is a sample of what one of the FullView templates looked like for an artist-related search (in this case, Dave Matthews):

AOL FullView Template for Artist-related Search

To me, it resembles more of what has morphed over the last several months – delivering a composite page with lots of rich content payoff above the fold. Compare that to a search for the same artist search today on AOL. using the new “look like Google” philosophy.

AOL Search As It Exists Today for Same Artist

It is drab for a content-rich search like a music artist, and is a pretty forgettable experience. Note the heavy use Google branding at the top and bottom of the page. I understood the desire: If consumers felt that they were getting “Google results” from any search originated from the AOL network, maybe they would reduce their tendencies to use the Google site directly. This search traffic capture objective, combined with the newest Google deal (done as part of the Google investment in AOL in 2005) to allow AOL to start selling their own version of adwords to major advertisers, certainly has intellectual appeal at some level.

The challenge with this approach is fourfold:

1. We lost the impact of some of the tips and techniques we had developed as a “veneer” player that maximized the revenue we could get from high-value searches – maybe that will be offset by the private label adwords, but maybe not…

2. Over time, the average consumer is going to develop more of a tendency to just go to directly – I certainly have begun doing that. The value of AOL as part of the value chain in the eyes of the consumer is getting pretty minimal.

3. It under-leverages AOL’s ability to deliver unique rich content assets from within the TWX network.

4. It is, by its nature, defensive in nature – how could you possibly grow search share materially this way?

I do think AOL has some great assets, and its video search is best-in-class, thanks to the Truveo acquisition. A great video search, however, will not have enough of a material financial impact to offset the gradual decline in core algorithmic search that this new Google-clone approach portends.

It’s time to revisit the decision before Google further erodes AOL’s position here. FullView may not have been the answer, but this current approach is definitely not a winning playbook.

Update: Saw the latest TWX earnings announcement this morning. AOL ad revenue up only 16% year-over-year (they did warn about this earlier in the quarter), but certainly better that some (YHOO). Under the assumption that continued to do well (since it is less tied to AOL pageviews), I am not sure how the rest of ad/search revenue did (I am assuming lower than the 16% average). I had hoped the paid subscriber declines would slow on a percentage basis, and the 1.1MM sub loss in the quarter pains me – it creates an environment of more OIBDA/cost pressure going forward. Here’s hoping that a lot of them were converted to free AOL users – I think we’ll hear about that “save rate” on the earnings call, since it is a critical leading indicator of the new strategy.

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16 thoughts on “AOL Search – a case of sincere flattery, but a bad business decision?

  1. Great post. I’m an ex-AOLer with fond memories of the company, my experiences, and the people.

    Here’s my 2 cents:

    AOL needs to do more than just re-think their decision regarding Search. They need to re-think the way Product and Technology work together to build great products and online experiences. Doing a half ass job of copying competitors won’t do the trick.

    IMO, Ron Grant has probably done irreparable harm to the company’s reputation, morale, and to relationships with partners and subsidiaries. At least if they replaced him with someone who has a cohesive vision for building great product experiences, people would start to use AOL just for the mere fact that their products were superior – and learn to like AOL (again). Instead, AOL product half baked, me-too crap.

    I was there 5 years… I can tell you that the company is in a world of hurt. “Good” people are leaving in droves. The Ron and Randy Show can’t end soon enough.

  2. from what i am hearing (unsubstantiate) the mantra these days at aol coming from top executives is – “clone Yahoo, clone Google”. IF this is true, it cannot be a winning strategy. A company that fosters an environment with no innovation is doomed.

  3. Let’s see, the value proposition for AOL Search is:

    Google – big chunk of relevant results + more ads + more promotion for AOL content

    Any marketing students out there want to come up with the messaging for that? You ought to get a Clio for selling that.

    No wonder some of the most talented people are leaving the group.

    The only scenario in which this makes sense is if you’re trying to pump up the numbers to sell the company.

  4. I am a former AOLer too — great write-up!

    That said, I am not sure AOL can bring back the old search — didn’t the majority of the Search team either leave or get laid off?

    It was really quite good… the per page monetization was far ahead of even Google.

  5. Great post John. I was one of the lead product managers on the AOL Search team during what I would consider the glory days of AOL Search.

    My own 2c on this subject is that AOL Search was a leader in search product innovation during a time when the dialogue in the search industry routinely ignored AOL. This had more to do with the brand perceptions of AOL (especially in the technoelite press) rather than anything we were doing with the product.

    In my admittedly biased opinion, AOL had achieved the formidable goal of creating the best search experience on the Web before this most recent removal of what John refers to as the “veneer.”

    That said, it seems to me that AOL had to swallow a bitter pill … it almost doesn’t matter what the AOL Search page is doing, people who are inclined to use AOL for Search will continue to do so regardless and those who are lured by the Google brand halo will go there even if AOL (or anyone else for that matter) offers a superior experience. If that’s the case, how does a business justify the cost of a large staff dedicated to creating the veneer if it’s not impacting the bottom line?

    Perhaps this answers the “if a tree falls” question. The answer is it doesn’t matter.

  6. Myron makes a great point. Google has such a strong brand that maybe it makes sense for AOL to throw in the towel on search and focus its efforts elsewhere.

    I remember sitting in focus groups and other consumer tests and you’d ask people “If you were looking for X, where would you go?” 90+% of the time the answer was “Google”.

    My big regret is that AOL didn’t fully support efforts to build true social search. In a search world where we see a lot of spam and gaming of the system, using social networks to deliver personalized search results has a lot of promise.

  7. fundamentally it boils down to the fact that search and aol are being run by people who aren’t product peope. kannapell, cahall, grant, falco… none of them. except for cahall, they’re all numbers guys. cahall? he’s an evp who writes code because he doesn’t trust his people, driving the engineering team away.

    for all his faults, miller cared about product. wish he’d had more time to carry out his web 2.0 strategy. take a look at circavie from aim– it’s a great idea, horribly executed.

    the “copy the competition” strategy shouldn’t surprise anyone. falco comes from nbc for chrissake. copying is all you do in the tv biz. right now there are TWO crappy game shows on tv where the contestant fills in lyrics to a song. and, yes, one of them is on falco’s NBC.

  8. Michael Ferguson (senior user experience analyst for shared some interesting Ask 3D data points on Search Engine Land:

    “We’re seeing encouraging data on Ask. On the user experience side, one of our focuses is ramping up the frequency of searches for those already using us. Since the launch of our new site design in early June, that metric has and continues to improve. Here are a few other indications that users like the richer experiences these pages offer:

    * Large jumps in satisfaction, seen both in surveys and server analytics that gauge user success. The satisfaction numbers are even higher the more content that appears with the results: on top of the page and in the right rail.
    * A bit lower click-through on sponsored and organic results per visit with the other choices on the page, but many more visits overall. Frequency and retention are up, which we expect to continue.
    * A 27% drop in the percentage of users moving to the second results page. They are getting what they want more quickly.
    * A 13% drop in search sessions with more than one search, when searchers use the search suggestions on the home page. These users are guided directly to what they want.
    * For searchers using either the TypeAhead search suggestions or our Zoom Related Search, there’s been 28% drop in abandonment.”

  9. Let’s be realistic. After IAC acquired Ask, there was no room for AOL Search to rank among the top 3 players in the traditional all-purpose search category. Personal technology categories, from desktop operating systems to browsers and productivity apps have traditionally had enough room for two leaders and a third rotating player (I am sure someone’s gonna come up with exeptions …). The search ecosystem was clearly heading for fragmentation. Crawling, indexing, computational linguistic and managing consumer media experiences definitely don’t require the same core competencies. Given the rise of social networking, broadband penetration, emerging semantic applications against the explosion of consumer generated content and awesome technologies re-inventing user interaction models. AOL on the Web had a unique opportunity to reclaim its historical online community fame and core competency.

    Web 1.0 was about linking information, Web 2.0 clearly is about linking people and the enormous impact of recycling social behaviors across all layers, implicit and explicit. I thought AOL Search had a unique opportunity to repositions itself as a “Discovery Engine”/”Recommendation Engine”, taking the lead on becoming the leader of an emerging new social search category. FullView was the base for exactly that.

    Congratulations to the tam for delivering on FullView. The performance was probably the only drawback … and was not brain surgery to improve.

    Anyways, is Engagement up since the swap from FullView to Google?

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