AOL: You've got new home office

Headquarters leaving Northern Virginia for New York to develop ad business

September 18, 2007|By Tricia Bishop | Tricia Bishop,Sun reporter

After calling Northern Virginia home for more than 20 years, AOL LLC announced plans yesterday to shift its headquarters to New York City in a move that's more symbolic than physical.

New York is the world's advertising hub, and AOL is aiming to become an advertising empire, building on the success of its Baltimore-based unit, Advertising.com. All ad-related businesses will now be swept into an umbrella network - collectively called "Platform A" - alongside the Locust Point company.

Yesterday's developments were described as the final stages in AOL's transition from a dial-up Internet service provider to an ad-driven company.

Advertising.com will remain in its headquarters at Tide Point, where the company recently extended its lease, but its chief executive, Lynda M. Clarizio, will now report to the newly appointed head of Platform A, Curtis G. Viebranz.

"With the increasing fragmentation of online audiences, the best way to serve advertisers is to enable them to harness massive advertising networks that reach across the entire Internet," AOL Chief Executive Officer Randy Falco said in a statement. "We have put together a network with unprecedented reach and state-of-the-art solutions that accomplishes this."

Advertising.com has been at the center of AOL's transformation since its acquisition in 2004 for $435 million.

The unit offers technology that analyzes data to place relevant ads on Web pages.

"Ad.com has been one of the best prizes. Over the past couple of years, its growth has been incredible," said Michael Nathanson, a media analyst with Sanford C. Bernstein & Co. in New York. "As long as [AOL is] not messing with the culture at Ad.com, then it's ok."

As Internet users move from dial-up access to far faster broadband, AOL has had to reinvent itself to survive. AOL lost more than 1 million subscribers during the second quarter of this year alone.

Last year, it began giving away access to many of its online services, introducing free e-mail, to rival offerings by Yahoo, Google and MSN. And it has been making a steady string of advertising-related acquisitions, including Third Screen Media, which enables advertising on mobile devices such as cell phones, and Lightningcast Inc., which creates broadband video ads.

AOL, a subsidiary of Time Warner Inc., is working to become the world's largest advertising network. Its combined divisions already reach 90 percent of the online audience. It offers ad space on its own Web sites, such as MapQuest, and ad-placement services through its subsidiaries - Advertising.com in particular.

The Baltimore company, founded by two Owings Mills brothers, brings in nearly a quarter of AOL's ad revenue, raising $455 million in sales last year - a 76 percent increase over its 2005 revenue of $259 million.

"I do very much see our role expanding," said Clarizio, who was an AOL executive vice president before taking over Advertising.com in mid-2006. The company oversees many of the advertising companies acquired by AOL and has more than doubled its staff since its own acquisition three years ago.

Today, about 700 people work for Advertising.com worldwide, about half of them in Baltimore.

Viebranz, Clarizio's new boss, is former chief executive of New York-based TACODA Inc., which AOL acquired last month for an undisclosed sum, reported by Reuters to be about $275 million. TACODA's technology analyzes consumer behavior and places ads accordingly.

AOL did not return calls for comment, but said in a statement that it will "continue to have significant operations in Dulles, Va.," where it still employs 4,000 people, even after the headquarters shift to 770 Broadway in New York. The Associated Press reported that senior executives would most likely be asked to make the move, joining roughly 400 others already working in the city.

"There's a lot of history at Dulles, but a lot of history at Dulles turned out not to be that great," said analyst Nathanson. "Moving away may signal moving away from that business."

tricia.bishop@baltsun.com

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