Marketing Campaign Case Studies

Wednesday, February 6, 2008


America Online, Inc. (AOL) used a strategy of mass distribution of start-up CD-ROMs and free trials along with unsophisticated late-night television spots to become the largest Internet service provider (ISP) by 1997. Because it relied on dial-up service, AOL faced a major challenge with the advent of broadband (highspeed) Internet access provided by telephone and cable TV companies. Moreover, AOL joined forces with Time Warner in a celebrated 2001 merger, creating a media giant. Expectations for performance were heightened, but AOL found the business landscape shifting and began to lose subscribers, both to cheaper dial-up ISPs and faster broadband service providers. AOL, pigeonholed as a dialup ISP in the minds of consumers, attempted to become a broadband provider but soon abandoned that strategy. Instead it decided to reposition itself as a premium-content provider—an add-on service for people acquiring broadband connections from other sources. In an effort to rebrand itself and pitch the broadband package, in January 2003 AOL hired Len Short, formerly of Charles Schwab & Co., to serve as chief of brand marketing. Short recruited a new ad agency, BBDO New York, to develop a campaign to sell AOL Broadband. In March 2003 AOL unveiled a $35 million, twomonth campaign with a new tagline, ‘‘Welcome to the World Wide Wow.’’ Unlike previous efforts, the new AOL television spots possessed all the glitz expected from a Madison Avenue advertising agency. They aired during prime time rather than being relegated to cheap latenight slots. The campaign also included an online blitz that saturated the Web with ads touting AOL Broadband. The television spot that received the most attention featured movie star Sharon Stone in a nightgown in bed, a life-size version of the AOL running-man icon, and a bit of double entendre.
The campaign’s ‘‘World Wide Wow’’ tagline was questioned by critics, and the Sharon Stone spot was singled out for vituperation. While Short maintained that he was pleased with the campaign and insisted that it had met its intended goals, his words were belied by his actions. He asked for new ideas from ad agencies, and a few months later AOL trotted out a new approach and a fresh tagline. Despite the changes, AOL continued to lose subscribers and failed to win many converts to its broadband service. By February 2004 Short had left the company, and AOL reverted to its previous marketing strategy.

America Online, an early participant in the Internet revolution, had by 1997 emerged as the leading Internet service provider (ISP), relying mostly on the mass mailing and distribution of program CD-ROMs and free trials. Beyond that, the company’s marketing was a ragtag affair that included buying television time on the cheap and airing crude spots late at night; it possessed no coordination and achieved little impact. Adweek critic Barbara Lippert described AOL commercials as ‘‘cheap-looking, numbed-out affairs featuring an array of smiley, zomboid converts at their keyboards, spouting lines stiffer than the ubiquitous sign-up discs.’’ The tagline was ‘‘So easy to use, no wonder it’s No. 1!’’ Nevertheless, AOL thrived because of it ease of use and low price, both of which appealed to the millions of consumers who began to buy their first computers and were unsure about how to navigate the new world of the Internet.
The scattershot approach worked until the 2000s. After it merged with Time Warner in 2001, creating the largest media company in the world, AOL began to see subscriber growth slow down. The market was becoming more sophisticated about computers and the Internet, as many people opted not to pay for AOL’s proprietary content and to simply subscribe to a less expensive, bare-bones Internet connection. Moreover, as a dial-up service AOL was beginning to feel pressure from broadband service providers, such as telephone companies offering DSL service and cable television companies offering even faster cable-modem service. AOL launched its own broadband service, offering a connection and AOL content while touting speed and ease of use. Given that all broadband products presented the same advantages, however, AOL struggled to differentiate itself from the competition. The company then changed course, electing instead to bundle its content with broadband carriers at an extra charge to consumers. The addon service included more video clips, better parental controls to keep children within the confines of the AOL site, virus protection, and a block on pop-up advertising.
To support the broadband service and meet challenges in the marketplace, AOL hired a new brand marketing head, Len Short, formerly with Charles Schwab & Co. In early 2003, after just one week on the job, he fired the company’s advertising agency, Gotham, which had held the account since 1997 and had not impressed Short with its approach to selling AOL Broadband. He then asked other agencies to pitch ideas for a broad $150 million campaign to rebrand AOL, but it quickly became apparent that the crux of the rebranding effort would be promoting the broadband service, and that $35 million job was given to BBDO New York. According to Julia Angwin, writing for the Wall Street Journal in March 2003, ‘‘The stakes are high. The AOL Time Warner unit is under fierce pressure to show results by the end of this year, or face the possibility of being spun off or sold.’’

In general AOL appealed to the family market. The service was not only easy to use for all age levels but also provided parents with a measure of control, preventing children—especially AOL’s large base of teenage customers—from being inadvertently exposed to the seamier side of the Internet. The company also touted the service’s ease of use for people new to home computing and first-time users of the Internet, those in need of ‘‘training wheels.’’
The broadband campaign targeted a narrower subset of the family market: people with enough disposable income to upgrade from dial-up Internet service to a high-speed connection, costing $40 to $50 per month, and who were also willing to pay an additional premium,
Through free trials and mass distribution of CDs, America Online became the largest Internet Service Provider. $14.95 ($9.95 for AOL subscribers), to receive the AOL interface and content. A major part of the campaign involved Internet marketing, which would inundate the Web with advertising urging current broadband users to subscribe to AOL’s content. But the campaign’s top priority, according to the Wall Street Journal ’s Angwin, was ‘‘to convince its 35 million subscribers to keep their America Online service when they upgraded to a highspeed Internet connection.’’

Although AOL viewed itself as a step up from Internet service providers (ISPs), which merely offered a connection, it still faced stiff competition from dial-up ISPs such as Earthlink and United Online (created by the 2001 merger of ISPs NetZero and Juno). These providers offered accelerators to boost dial-up Internet speeds. To compete on this end of the market, AOL added its own speed-enhancing upgrades. The company also received competition from telephone companies offering DSL service and from cable TV operators with their cable modems. By no longer offering broadband connections and repositioning itself as an add-on service, AOL skirted direct competition and formed partnerships with many of these broadband providers, making AOL available to their customers at an extra charge.
Nevertheless, many of these broadband customers would be content with a bare high-speed connection and would therefore forego AOL’s exclusive content and added features. Moreover, customers could increasingly turn to other sources for the types of services that AOL offered; as Angwin reported in the Wall Street Journal, ‘‘cable and phone companies . . . are adding snazzier features to their broadband services.’’ To make the landscape even more competitive, Internet portals such as Yahoo and Microsoft’s MSN also added virus protection and pop-up blockers and teamed up with telephone companies to offer high-speed Internet connections at a lower price than broadband plus AOL. In an interview with Catharine P. Taylor of Adweek, Short said that AOL Broadband’s competition was essentially ‘‘everybody,’’ adding, ‘‘But in some ways, we don’t have competition, because our product is fundamentally compatible with all the connection providers, and we have proprietary content. However, at this early stage of broadband, some people are making a decision between us and another broadband provider, because they see us a dial-up connection. That’s going to get eliminated as we go forward.’’

To promote AOL Broadband, in March 2003 AOL released a $35 million, two-month advertising campaign developed by ad agency BBDO. The first two commercials, using the tagline ‘‘Welcome to the World Wide Wow,’’ were unveiled on the Academy Awards telecast. One of the spots, ‘‘Six Million Dollar Man,’’ was a parody of the opening of the old television show about a man with artificial parts that gave him superhuman powers. Instead of actor Lee Majors the spot featured AOL’s familiar Running Man icon being rebuilt ‘‘better than before,’’ making the case that AOL Broadband was a quantum leap above the old dial-up version of the service. The second spot featured actress Sharon Stone rolling around in bed, apparently after making love, telling someone off-camera, ‘‘that was the most amazing experience I ever had. So, can you stay? Or do you have to run?’’ A life-size version of the Running Man was then revealed. As he rushed offscreen, an announcer said, ‘‘The new AOL for Broadband is just a little sexier than you might have imagined.’’ Left alone, Stone muttered in disgust, ‘‘icons,’’ as if saying, ‘‘men!’’ Subsequent spots in this initial phase of the campaign showed a model whose body was covered with pop-up ads that were removed by AOL’s new blocking software, and monks, who had taken a vow of silence, communicating to one another through AOL’s instant messaging feature. In addition to the television spots, the campaign included a large Internet component. Some of the animated Internet ads were designed for specific types of content. On the Weather Channel’s website, for example, clouds forming the Running Man floated across the home page, then the clouds dissolved into an ad with the headline ‘‘Life needs a better outlook.’’ The goal was to reach more than 80 percent of the online population within two days.

America Online was launched in 1985 as Q-Link, an exclusive online service for owners of Commodore personal computers that was introduced by Quantum Computer Services, Inc. Tandy computer owners were added in 1987 and IBM-compatible computers a year later. A Macintosh version of Q-Link was introduced in 1989, the same year that Quantum Computer Services unveiled a nationwide network for personal computer owners called America Online. In 1991 Quantum assumed the America Online name.

The broadband campaign met with quick criticism. The ‘‘Welcome to the World Wide Wow’’ tag was widely ridiculed. In a review for Adweek, Barbara Lippert asked, ‘‘Has anyone actually uttered the words World, Wide and Web together since, like, 1999?’’ Simon Dumenco wrote in New York magazine, ‘‘The only wow factor is roughly along the lines of, ‘Wow, does Sharon Stone need money that badly?’’’ As much as the tagline was criticized, the Sharon Stone spot was eviscerated. Lippert wondered, ‘‘And what is the take-away here? That if you sign up for AOL Broadband, like Sharon, you’ll get screwed? And unlike what you see from an ISP, why would you want a lover who is superfast?’’ Dumenco further commented, ‘‘The irony is that in aligning itself with a silver-screen temptress whose moment has come and gone, AOL has only reminded us all how precipitously it, too, has faded.’’
After two months AOL once again put up its advertising account for review in what was called a ‘‘repitch.’’ Catharine P. Taylor, writing for Adweek, cited sources who said that AOL was dissatisfied with BBDO’s broadband campaign. Short disputed this contention, maintaining that the campaign had met all of its objectives. ‘‘This is a two-stage game,’’ he said. ‘‘And I’m dead serious about stage one and I’m dead serious about stage two.’’
Stage two was the release of AOL 9.0 Optimized, a new version of the AOL software that included a fuller package of the company’s broadband capabilities as well as enhanced features for dial-up users. Despite a new series of television spots, a new tagline (‘‘Life needs . . .’’), another online advertising blitz, and partnership deals to add popular content such as professional-sports video highlights, AOL continued to lose subscribers to faster or cheaper competitors. Very few of its dial-up customers making the switch to broadband elected to pay extra for AOL’s premium-content package. Media analyst Tom Wolzien explained to Ann M. Mack of Adweek, ‘‘You can have the greatest advertising in the world, but if the value proposition isn’t appropriate to your consumers, nothing’s going to work.’’ After little more than a year on the job, Short’s tenure with AOL came to an end in February 2004. The advertising budget was also slashed by about a third, and the company reverted to a more conservative marketing approach.

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