Technology

AOL's Mobile Ambitions


The company once known for bringing the Internet home wants to make its software available on cell phones worldwide

In recent months, Google's mobile aspirations have generated headlines aplenty. But out of the limelight, another major Internet player, AOL, is preparing to flex its mobile muscles as well.

Consistently trailing far behind Google (GOOG), Yahoo! (YHOO), and Microsoft's (MSFT) MSN in online traffic, AOL might not appear as worthy of worry in the wireless industry as Apple's (AAPL) iPhone or Google's prospective gPhone software platform.

Think again. U.S. traffic to AOL's mobile Web site is higher than that to Google Mobile's and double that of MSN Mobile's, according to Hitwise. Mobile-phone users also tend to spend much more time on AOL's sites than Yahoo's, says David Gill, an analyst with consultancy Telephia. "Their audience is highly engaged, and advertisers like that," he says. And judging by the recent ramp-up in its mobile efforts, AOL is determined to recapture some of its former Internet glory as a preeminent wireless hub.

Deals Galore

Most significantly, AOL tells BusinessWeek.com that it is working on what it calls a software module—a unified application that would integrate AOL's multitude of mobile offerings into one master portal. At present, cell-phone users typically need to open separate applications to access services such as AOL Mail, AOL Instant Messenger, Moviefone theater listings, MapQuest navigation software, and City Guide local search—and many carriers only offer one or two.

As these modules wouldn't serve as an underlying operating system for a phone like Windows Mobile, Symbian, or Java-based BREW, AOL's endeavor would not mark as dramatic an undertaking as Apple's (AAPL) adaptation of the Mac OS for the iPhone or Google's still-unannounced gPhone platform. Those efforts seek to wrest control of users from the wireless carriers. Still, AOL's goal is much the same: to provide a suite of mobile services that's quicker and simpler to use than the hodgepodge of applications loaded on most cell phones.

To date, AOL has cut deals with wireless carriers rather than handset makers to get its applications loaded on phones. But a source tells BusinessWeek.com that AOL is now in discussions with HTC of China and other handset makers to install its software modules on their devices. AOL stresses that working with carriers remains a major part of its mobile strategy, but confirms that it is speaking with handset makers. "We are actively engaged with all handset manufacturers," says Scott Falconer, executive vice-president of AOL Mobile.

New Features

AOL has revealed its wireless aspirations in other ways as well. In June, the company hired a telecommunications executive, former AT&T (T) vice-president John Burbank, as new chief marketing officer for all of AOL, not just the mobile group. The careers section of AOL's corporate site currently lists 14 mobile-related jobs in the U.S. and nine more in China. One of the openings is a senior strategy manager position with AOL Mobile. The job description says the applicant would help AOL with future strategic acquisitions, suggesting that Time Warner (TWX) is prepared to put money into this push.

Perhaps the biggest sign that AOL is serious about wireless is a slew of new and revamped mobile applications. The company recently relaunched the portal that users can visit via mobile Web browsers, changing it from a mostly text-based affair highlighting a few news stories to a richer site with a wider variety of content and ads. Likewise, the company has overhauled its mobile search application to enable users to receive more targeted results, a feature already offered by Google and Yahoo. With this enhanced mobile search engine, a user can enter a zip code and the word "sushi" on a phone to receive the address of the nearest sushi restaurant.

Starting in October, AOL plans to aggressively promote the mobile applications on its Web sites and introduce new features rivals don't have. All pages on the desktop version of AOL.com will start featuring "send to cell" buttons. When users press them, they'll be prompted to enter their mobile-phone numbers, triggering text messages to those handsets with links to AOL services.

Ad Explosion

By yearend, AOL plans to launch a mobile version of WinAmp Remote, a content-sharing application that will enable a cell phone to play songs and videos stored on a friend's computer. A mobile version of AOL's just-announced BlueString, a video- and content-sharing site, is in the works as well. Also on tap for the coming months is the launch of AOL My Mobile, which will enable users to replicate their desktop AOL preferences on a cell phone. And for those who'd prefer to stick with single-purpose applications, AOL is working to create mobile widgets with companies including uLocate, which has developed similar software for Sprint Nextel (S).

Despite all the initiatives, AOL is hardly a newcomer to mobile. The company launched its wireless efforts in 2000 and has since accumulated a rich portfolio of applications and struck a wide range of distribution deals with major wireless carriers including AT&T (T), Verizon Wireless, and Vodafone (VOD).

The newly intensified focus is no doubt spurred by an expected explosion in mobile advertising. In the U.S. alone, revenue from mobile search ads is projected to mushroom, from $33.2 million in 2007 to $1.4 billion in 2012, according to consultancy the Kelsey Group.

Crowded Field

Such projections are hard to ignore for a company that needs to augment dwindling revenue from Internet access subscriptions with an increased focus on ads. To that end, in May, AOL acquired mobile advertising network Third Screen Media. And on Sept. 17, Time Warner launched AOL's Platform A, an ad network allowing marketers to reach AOL users both online and on mobile phones. "We are finding that half of our big accounts are at least asking what they can do on mobile phones," says Falconer.

Some of AOL's key rivals may actually prove instrumental in the outcome of this mobile gambit. Google, which acquired a 5% stake in AOL for $1 billion in 2005, and MSN may both seek to distribute their ads on all of AOL's mobile sites, suggests Matthew Booth, an analyst with the Kelsey Group. Both "will be writing huge checks to get that deal done [soon]," he says.

But to ensure it remains relevant as a mobile ad purveyor, AOL will need to convince loyal e-mail and IM users that its wireless offerings are sleeker and easier to use than the robust offerings coming down the pike from powerful rivals. "AOL is not the first company that would leap to people's minds in thinking of mobile efforts," says Fred Boxa, a principal with IBB Consulting. "But they are trying to change that."


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