AOL's Falco: Consumers Are in Control

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As Chairman and Chief Executive Officer of AOL LLC, Randy Falco is responsible for setting strategy and overseeing the businesses and operations of this global web services company. Falco joined AOL in November 2006 from the NBC Universal Television Group where he was President and Chief Operating Officer.

Editor's note: Don't miss our one-on-one interview with Randy Falco.

Newly minted AOL Chair and CEO Randy Falco opened this week's iMedia Brand Summit in Coconut Point, Florida to a packed room. The title of his talk -- what Falco described as his inaugural speech in his new role -- "Media 2.0: Where Consumers Are Going, and How to Connect with Them." 

"I noticed watching the opening video that it says, 'AOL delivers.' That's true, but today I'd like to expand on that a little and talk about how the internet can deliver."

When he made the decision to leave the world of television after 31 years at NBC, many of his friends and colleagues wanted to know why. "My friends in traditional media are trying hard to understand the digital media landscape. They are experimenting with new forms of distribution, from video streams to iPod sales. At the same time, they are struggling with declining audiences and sluggish ad revenue growth, and trying to figure out how to adapt their business models to this emerging new interactive reality," Falco said.

What portals like AOL, Google and Yahoo! bring to advertisers, Falco said, is scale, scale that the websites created by the big TV networks can never hope to equal. "Since I've always been used to having scale when talking to marketers, I thought, 'isn't it better to be standing where the ball is thrown rather than scrambling to catch up to it?" Hence his move to AOL.

"Since we're all in this together," Falco told the audience, "I need all your talent and creativity to truly innovate in this space." He laid out three particular marketing challenges:

  • The internet should find its own version of the 30-second spot
  • Marketers should work with AOL to find new and more effective online campaigns
  • Everybody should work to make online display ads more dynamic and engaging.

Weaving into these three challenges, Falco articulated the four facets of online that have most struck him since his arrival at AOL two months ago: the unprecedented pace of change; "the importance of the consumer, who grows increasingly in control of everything online;" the explosion of online video, and the growth in the importance of networks.

Pace of change
"It took 26 years for television to reach one quarter of the population, and it took radio a similar amount of time, 22 years," Falco said. "But guess how many years it took for broadband to reach into a quarter of U.S. homes: just eight."

"Terms like Web 2.0, the long tail, podcasts, feeds, mashups, didn't even exist in any practical sense just a year or so ago," Falco continued, asserting that today such technologies are transforming both traditional and interactive media, with examples that include:

  • 70 million iPods sold in about five years
  • 2 Billion songs sold by Apple
  • 12 million DVRs in just over six years
  • 2 Billion cell phones worldwide

"Each of these technologies is putting more control in the hands of consumers," Falco said. "Letting consumers decide when, how, where, they get their information." All of these things point to an insatiable consumer desire, "to share information and entertainment, and to be heard!"

Consumers in control
At NBC, Falco said, he had thought the network to be "unrelenting" in its focus on the audience, what worked, what failed, and what it wanted. However, that focus pales, "in comparison to what's happening online: we're not only watching consumers, but consumers are watching us."

Moreover, Falco said, the consumers are "increasingly involved in generating their own content… in essence, your friends are the network." As proof, Falco cited the phenomenal growth of YouTube, MySpace, Digg and Craig's List, all of which grew entirely by word of mouth, with 63 million people maintaining blogs, as well as interacting with photo-sharing sites, podcasts and more.

Next: An Explosion of Online Video