AOL to Reorganize

AOL plans to undergo a massive internal restructuring, both to realign its business units to reflect its new focus on advertising and to create a nimbler organization, according to a company-wide internal memo from Jonathan Miller, AOL’s chairman and CEO.

The last major organizational changes for AOL came in November 2004, when it carved out four business units: Access, Audience, Digital Services, and AOL Europe. Those divisions are no longer relevant to AOL’s new business, according to Miller.

“It is my belief that this structure served us well but no longer reflects what we are doing. Starting last month, our whole company became an ‘audience’ business,” Miller said in the memo. “Moreover, our international aspirations go far beyond Europe, as important as that market is for us. Therefore, the four large business units that defined us for the past two years will be replaced by smaller, nimbler product groups with more authority and greater accountability.”

AOL plans to give greater autonomy to its product groups, as well as demand more accountability from them. Product leaders will become more like general managers, responsible for product technology and development, quality assurance, business development and distribution, and product adoption.

This kind of structure will help AOL break through a complex reporting structure to create a “product-led global business,” Miller said, with leaders that have the ability to design and implement products, and drive their adoption. Miller noted that the 2004 reorganization made progress in that direction, but did not go far enough. AOL will also push more technology resources into each product unit.

At the same time it decentralizes some control over products, it will retain centralized functions in key areas. Efforts surrounding AOL’s ad sales, supporting what Miller calls AOL’s “monetization machine” will remain centralized. That includes brand and display advertising, as well as performance-based advertising, both for AOL itself and third parties.

AOL is also increasing oversight on privacy-related matters, in response to the August “search data debacle,” as Miller calls it, where search logs from more than 500,000 users over three months were released and quickly withdrawn by AOL’s research team without corporate approval. It has moved its general counsel, Randy Boe, into a new role, creating a unit “dedicated to aspects of how AOL interacts with and protects consumers,” Miller said. That group will include a yet-to-be-named chief privacy officer.

AOL will retain centralized corporate functions, including finance, HR, corporate communications, legal, the office of diversity, and CTO, which will continue to report to Miller.

The moves follow the announcement by vice chairman and architect of AOL’s revival Ted Leonsis would step down from day-to-day duties next year. Several of the execs that formerly reported to Leonsis will now report to Miller, some with significant changes to their responsibilities and shape of their teams.

Leonsis, Miller, and Miller’s deputies are in the process of “reviewing the talent” to determine who will fill the roles on several newly created teams. Miller has tapped four key executives to report to him: Joe Redling, Jim Bankoff, Kevin Conroy, Mike Kelly.

Redling, most recently AOL’s CMO and president of its access business, will take responsibility for key initiatives around international expansion, mobile technologies, and customer relationships. AOL plans to expand its advertising business globally, with mobile plans playing a key role in those markets where mobile devices are entrenched. This gives mobile a company-wide focus and investment it did not previously have, Miller said, reflecting its importance in AOL’s future plans.

Bankoff, Conroy and Kelly, who previously reported to Leonsis, will report to Miller beginning in January. Bankoff, AOL’s executive VP of programming and products, will keep his responsibility for programming and AIM, adding AOL’s voice initiatives to his group, since those are based on the AIM platform.

Conroy, currently executive VP, will be responsible for developing and distributing AOL-branded products, including AOL.com; AOL mail, storage, and video; and the AOL client. There will be no new CMO to replace Redling, but Conroy’s group will take over that kind of centralized marketing function, Miller said.

Kelly, who Miller praises highly in the memo, will retain oversight of the ad sales group. As president of AOL’s media networks, Kelly made it possible for AOL’s strategy shift in the first place by running a sales organization that could support the move, Miller said. Kelly will continue to oversee AOL’s search business, which will gain prominence with AOL’s emphasis on mobile, Miller said.

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