AOL Reaches Out

Time Warner's Internet arm is aiming to bolster its portal for kids, part of a bigger effort to reach groups that are younger and nonwhite

by Catherine Holahan

When it comes to the Web, computer users don't all want the world. Many just want their world—specifically, the news, entertainment, and social networks relevant to their background and interests. Serving up such tailored content has become a critical challenge for large Internet portals, including AOL.

Time Warner's (TWX) Internet arm is trying to grow its audience and revenue base through the creation of homepages targeting key U.S. groups such as youth and ethnic minorities whose online ranks are rising rapidly. To that end, AOL is on the hunt for a partner to help bolster its portals aimed at kids and teens, BusinessWeek.com has learned. The company is now accepting bids from companies interested in forging a deal similar to the one AOL has with Telepictures, also owned by Time Warner, that governs AOL's celebrity news and gossip site TMZ.com. The company is already talking to a few suitors.

Affinity Networks

Possible partners include private equity firms capable of funding the creation of original material or a media company that could supply content to the site and distribute it on a variety of platforms, such as on mobile phones, says a person familiar with the situation. Time Warner certainly has qualified units under its own umbrella, including Cartoon Network and Kids WB. Other possible partners likely on AOL's wish list include Viacom (VIA), owner of the MTV and VH1 networks.

AOL isn't confining its efforts to the youth market. On Dec. 4, the company made a Spanish-language version of its homepage, AOL Latino, previously available only to subscribers, available free over the Internet. The portal page, which was started in 2003 and is run by an editorial team, features news and entertainment content related to Latino and Hispanic culture. The design is similar to AOL's offering that targets African Americans, "Black Voices," which was acquired from Tribune Co. (TRB) in 2004.

Ralph Rivera, vice-president and general manager of AOL Latino, says the initial strategy behind AOL Latino was to encourage more Hispanic Americans to go online by providing a portal in a language spoken at home with information pertinent to their culture and community. AOL has since dropped the subscriber model and instead will rely on advertising revenue. While the goal is the same, the motivation behind it has changed from generating more subscriptions to serving ads. "The site became a great opportunity for us to act as a vehicle for advertisers to reach a large audience of Hispanic people online," says Rivera.

AOL also has homepage-like sites for technology enthusiasts and small businesses, says Jim Bankoff, AOL's executive vice-president of consumer and publisher services. AOL views such affinity networks as a way to provide extra value for marketers, who are willing to pay more to reach a targeted audience. "It is a great deal for the marketers because they are inserting themselves into a conversation that is very engaged and very passionate," says Bankoff.

Untapped Market

Advertisers are particularly interested in the Hispanic and African American markets, which are growing at a faster pace than other groups such as Asian Americans and whites. Hispanics and African Americans are also becoming increasingly wealthy, says Debra Aho Williamson, a senior analyst at eMarketer. There are more than 40 million Hispanics in the U.S. today. By 2050, roughly one-quarter of the total U.S. population will be of Hispanic origin. The African American population is also projected to increase from 13% of the total U.S. population to 15% in 2050. That doesn't include the number of biracial and multiracial Americans who will have African heritage.