RECENT AOL NEWS:
FROM THE POST:
AOL announced in March that it will have ads in chat rooms.
AOL recently connected with another big-name outsider, Brandon Tartikoff.
ON AOL'S WEB SITE:
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Robert W. Pittman, President of AOL Networks
NEW YORK--Last fall, Bob Pittman signed on as president of AOL Networks, the Dulles division of money-losing America Online Inc. that runs the 8 million-member information service, and a position that reports to AOL Chairman Steve Case.
Pittman, 42, who created the MTV and Nickelodeon cable channels and ran the Six Flags amusement park chain, was most recently chief executive of Century 21 Real Estate Corp. but had been on the AOL board of directors for a year. He recently chatted with Staff Writer Victoria Shannon in AOL's Manhattan offices as the company unveiled a plan to put advertising in chat rooms online.
Here are excerpts from the conversation:
Q. As a consumer, are the ads [in chat rooms] going to bug me?
A. Here's what I think the win-win-win is -- and it did happen with the Tel-Save deal [announced March 4], which is the model I'd like to have. [AOL agreed to post Tel-Save ads to enable subscribers to sign up for the phone service while online and bill their long-distance charges online.] On the Tel-Save deal, the consumer is going to get a very low-cost long-distance option. If we save the fellow's money, yes, we can take some of his advertising, but what we also like to press them to do is give our members a low price. So we can say, "You're a member of AOL? I'm using our clout to get you some cheap prices on things you need and want." And by the way, it's easy to argue to the Tel-Saves, "Listen, if you do that, you'll get a better penetration anyway, and as long as you're making money incrementally, you should go for the volume because that's the play."
Q. Do you spend any time in chat rooms?
A. I do. I click through them, jump through them. I'm mainly an observer, but will I participate? Yes. I often try and goad people on. Throughout the whole debacle with demand, I was in there probably every other night trying to goad people because I was trying to see how they felt and what was going on.
People's affinity for it depends on whether you would sit in a bar and talk to a bunch of strangers about all sorts of things, because it is, in my mind, the same activity. It is the online version of just chatting about anything.
Q. Are you all settled in Northern Virginia now? Have you bought a place?
A. Yes, I did.
Q. Where are you living?
A. Oh, I'm not telling anyone that. I went to great lengths to make sure no one's going to find my house. You know, in New York, everybody knows where everybody lives, and no one ever publishes that. I spoke to Steve [Case]: "You know, in this high-profile business . . . it's horrible that they would do that." [In December, The Post published Case's purchase of a $1.25 million home in McLean.] So I actually went through my lawyer and I said I want to figure out how we do it so that my name's never on this thing. I don't want people to find my house. I was somewhat surprised by that.
Q. In Northern Virginia, though, right?
A. Yes, Northern Virginia.
Q. A house?
A. A house.
Q. How are you measuring access improvement these days?
A. I think the best way probably is to listen to the consumer. Weekly, we're doing studies with people -- "What are you feeling?" We do three levels of studies. We do one level, which is people online, and we go to them and survey them. The second level is subscribers who we reach out to and survey, and third is the people who are not AOL members -- what's their perception of us.
What we're finding is clearly that if you have to use AOL it's getting a lot better. Our online users are the ones reporting the most improvement, people who are members but may not be using it as frequently report second-best, and the outside world that doesn't use AOL is the farthest behind reality.
Consumer perception lags reality -- on both sides of it. I mean, the problem gets worse before people realize it's a problem, and it gets better before they realize it's better.
Q. Your main measurement of this is in feedback?
A. It is. We will do stuff like we go through major cities and we call the least busy number and the busiest number in that market. Every day we're calling 50 cities, 100 cities, and testing at all hours to see if we can get through every hour, how many times. What we're really looking at is how long does it take you to get on -- what's the average?
. . . You'd like people to be able to get on in one minute or so, and we're beginning to get that in most places.
Q. I hear a lot of complaints still.
A. Most of the problems that we have today, I think, are probably people who haven't gotten new access numbers, because we do have some numbers that are still heavily busied out even though we have a lot of them. They don't know how to change the number -- that is one of the big problems that you have.
Q. Ted Leonsis [president of AOL Studios] would always say that "Seinfeld" is the competition. Is that what you see as your competition?
A. In a very broad sense. The reality is TV is the competition for anything in the home. Remember, most Americans have a table here and a TV here, and they're eating and watching TV. And they read and do it -- they've got the newspaper and the TV on. And that's one of the problems with these Web TV-type products. They forget the fact that people now have their computer and the TVs on. And the services have a lot of music and I'll say, "Isn't this music neat?" and they'll say, "No, because I can't hear my TV." It is reality -- I'm long past value judgments, having been in the TV business for a big portion of my life.
Q. What is the AOL of the year 2000?
Q. Ya . . . ?
A. The challenge you have with new products is to get 'em to be a necessity. They're either a luxury or a novelty -- get 'em to be a necessity. The best way to figure out how to do it is to get 'em to use it more every year. If you do, it'll be a necessity. The Hula-Hoop went like this [inclines arm down to show declining sales], that's clearly a novelty. Cuisinart went like that [motions the same] -- I'm not sure it ever was a necessity. Dishwasher went like that [moves arm nearly straight up], microwave oven went like that, cable TV went like that, and AOL's going like that. The challenge is to continue to embed ourselves into the public's life.
Q. Unlike in the early years, a lot of people now think that AOL is not as customer-responsive -- turns a deaf ear to them.
A. That, I'll tell you as a newcomer to it, is not true. Maybe they didn't hear it the right way, maybe they misinterpreted it, maybe we got too bureaucratic to do the right thing. But what's interesting about the business -- and I was struck with it the first time I met Steve Case -- was that the company . . . like I said, there's a blurry line between advertising and commerce? There's a real blurry line between member and employee. These people feel a sense of community that's not a cliche but reality. They also feel this affinity for the customer. And when they got these busy signals, everybody was so distraught because it was like they were hurting their mother. It wasn't like they were hurting some unknown consumer product.
Q. So how many people have requested refunds?
A. Not a huge number. I think at the end of the day there is some percentage that truly couldn't get through and for whom it really was a problem. There are others who said, "I got a busy signal and I didn't like it but I got through, I used the service." So I think there are all varying levels of it.
You know what the reality is? Our policy generally is if you call up and you've got sort of a legitimate beef, we usually just say okay. We're pretty reasonable on this stuff. My view of customer service, having been in a lot of these other businesses, is just do what it takes to take care of people.
Q. You'll still have to have some kind of reckoning or accounting of this.
A. We feel comfortable we're well within the $20 million reserve or $22 million reserve we have. The main thing is -- what you want at the end of the day is -- to have done the right thing for customers. You hit a bad patch. You know what? Maybe they'll forgive us. Some won't. But at least you want to make sure you did the right thing by them.
Q. What is your revenue goal for chatroom advertising, say, if all chatroom minutes were sold?
A. Well, it's huge, but I would caution you against doing that because that's like saying what if all the inventory on AOL were sold. That would be a $2 billion ad sale, and we're not going to sell all the inventory and never should.
Q. What's the goal?
A. I think most analysts have us doing between $50 million and $60 million in advertising this year.
Q. Real-life example: I took the opportunity of this trip to stop at my sister's in New Jersey over the weekend. She's had a computer for two years and a modem for two years and did not want to have anything to do with anything online. But I made her sign up Saturday night.
A. Did you? To who?
Q. AOL. She said, "I get 50 hours free on this one." . . . But I was there every step of the way. So any time she had a minor frustration, I'd say, "Hit cancel," or whatever. If she were on her own, she might have gotten frustrated enough to stop.
A. When we're starting to get to the kind of consumer we are now, like your sister, we are getting to the point where as simple as we are, it's complicated.
Q. We also got to the credit card screen, and she said, "Are you sure I can do this? Is this really safe?"
A. What's interesting to me too is increasingly when we say, "What's your biggest problem?" the biggest problem is you have your computer here, and you have an AOL disk this close, and for six months it doesn't go in that slot. When you say, "What's the marketing challenge?" It's to get you to do this [puts disk in slot]. . . . In my job, I'm at the point now where I live in a world that I can learn a lot real quickly. And I sort of told the guys that I work with, "You know, should I get a lot smarter really quickly, or should I . . . ? I mean, I'm reasonably smart, should I try and deliberately not get too smart about some of this stuff so I have a little better instincts on the consumer?" I'm way ahead of where our consumers are, but I'm way behind you guys.
. . . I was my best at Six Flags theme parks the first two years I was there because I had a lifetime as a consumer with never any expectation I was going to work in the business.
. . . My first week on the job there I worked as a street cleaner. I said, "Give me the worst job in the place." I had on the little shorts and I was out cleaning streets -- worst job in the park -- and I learned a very valuable lesson. These people worked very hard, and they hated our customers. The reason they hated the customer is they thought their job was to keep the park clean, not to give [the customers] the best day of their life. The only reason they were cleaning the park was because a dirty park would give them not the best day of their life, and they didn't connect the two.
And then I looked at the employee handbook and it said our number one concern is safety. And I said, "No, it's not, our number one concern is our guest. We're only interested in safety because it's the number one concern of our guest." And then we had to overhaul the culture because everything was about operational considerations like that. Nothing was about the customer. I think that happens with every business, where you get so caught up in "speed up the process, do my production." Wait a minute -- the customer, remember?