October 22nd, 2003
Media & Marketing -- Advertising: AOL Aims to Break Out of the Box; Fresh Ad Funds Target Ways to Reach TV Viewers Tuning Out Commercials
By Suzanne Vranica and Julia Angwin
Wall Street Journal
America Online, eager to energize its flagging brand, will more than double its
U.S. advertising spending to $275 million next year, up from $115 million in spending
this year. Adding a sense of urgency, the company is putting its account, currently
handled by Interpublic Group’s Initiative Media, up for grabs.
AOL says it wants media relationships that extend beyond traditional commercial
buying, including opportunities to place the AOL brand on various television
shows and the like. "People are tuning out commercials and using TiVo,"
says Len Short, executive vice president of brand marketing at the Time Warner
unit. "We need to get our brand out in other ways."
Pile & Co. in Boston is conducting the U.S. media review, and Initiative
Media has been invited to defend the account. "We want to make sure we
are developing the best thinking," says Mr. Short.
Although AOL remains the country’s largest online service, with more than 25
million U.S. subscribers, the company is suffering from slumping advertising
sales and subscriber defections. Broadband rivals offering high-speed and discount
Internet service have been winning away some AOL customers in the past year.
Time Warner reports earnings today. Many on Wall Street expect AOL to have
continued losing subscribers and to post declining profit. However, the online
unit’s performance likely will be offset by stronger results at other divisions,
including Turner Broadcasting and Time Warner Cable.
AOL joins a growing list of marketers who are expressing dissatisfaction with
traditional TV advertising. Struggling with audience fragmentation, increasing
ad clutter and the proliferation of commercial-skipping devices such as TiVo,
marketers are eager to have their messages embedded into the entertainment content.
AOL, with the help of its current media-buying firm Initiative Media, recently
scored something of a marketing coup. During the World Series broadcast on News
Corp.’s Fox, AOL’s "running man" logo appeared on the screen as a
lead-in to various action replays. The yellow animated figure is seen hitting
a home run or sliding across the screen—causing some viewers to cry foul.
Mr. Short believes this type of in-your-face promotion helps consumers remember
the AOL name. "It raises recall," he says.
Frustrated marketers increasingly are searching for sponsorship agreements,
product placement and elaborate tie-ins with TV programs. The demand is so strong
that some agencies, such as Publicis Groupe’s Starcom MediaVest, have launched
divisions dedicated to drumming entertainment-related promotions. And the networks
are listening.
Some viewers already are protesting. "Embedded advertising is taking over
television," says Gary Ruskin of Commercial Alert, a nonprofit group founded
by consumer activist Ralph Nader. "It’s inherently deceptive." The
consumer watchdog group has asked federal agencies to investigate current product-placement
practices on TV.
"You need to safeguard that consumers aren’t being duped, but I haven’t
seen anything that comes close to that," says Mr. Short. "Consumers
are incredibly sophisticated."
The media review comes several months after AOL overhauled its creative account.
Shortly after joining the online division in January, Mr. Short ended AOL’s
eight-year relationship with Interpublic Group’s Gotham and eventually hired
several agencies, including Omnicom Group’s BBDO Worldwide.