AOL chairman Miller tells Summit marketers about company's renewed relevance to them  (first of three parts).

When Jonathan Miller joined AOL in 2003, Time Warner boss Richard Parsons gave him a simple mandate: turn the world's biggest ISP around. Miller has done just that. In a conversation with marketing consultant Neil Perry at the iMedia Brand Summit, Miller talked about the "new" AOL, Advertising.com and how the company will grow market share. Here's their conversation.

Perry: It's interesting, I think, if you look out in the industry, anytime you read an article about America Online, it always starts out in the first paragraph with the declining subscription base. So that's where we're going to start today. We're going to start with that declining subscription base. What is AOL going to do to continue to be relevant to the marketers in this room with that situation?

Miller: That's a good question. So, let me get this right. I've got to sponsor this, pay for it, and then you ask questions about it?

[laughter]

Miller: And the articles always used to start off the past couple of years, "the beleaguered AOL in a desperate attempt to…" and then fill in the blank. It was kind of required journalistic form. And that stopped. That stopped, actually. They no longer do that, which is a small indication a turnaround has taken place even in the press.

The simple business idea is we have a narrowband business, and every narrowband business is declining. We have a broadband subscription business that's growing and we have an advertising search commerce business that's growing. If the last two grow faster than this one declines, we do great -- and that is in fact what's happening to that business.

So, it's a very simplistic but really high-level and correct way to think about the business. The narrowband world is shrinking for everybody. That's the market. And the biggest thing I believe in any business is getting in sync with the market. So what you do there, you preserve the economics, you preserve the base, you leverage it, you get everything you can out of it, but you use that leverage to get into where the market's going, which is broadband and beyond.

Perry: OK, great. I've heard you speak before and one of the comments that comes up frequently of making AOL easier. I think if you spend a little time chatting with the folks in the audience, there may be the impression that you're really not quite there yet, or the reputation is AOL has not been easy to work with. Show a little bit, for all of us, your approach to making it easier.

Miller: It's probably - - the company that made the Internet easy for people, maybe didn't make it easy to do business with us, and that's unfortunate. But, I think the biggest thing now is commitment. We're committed to the advertising business in all its forms. I mean, this is real for us and we're committed to doing it right. And doing it right means to be the best place to do business. We recognize that we haven't been that historically, and we've set that goal, and, everyday we march as far as we can.

Mike Kelley, David Lebow, Michael Barrett, all of whom are here today, I mean, that is, that is something we march to. We march to getting in sync with the market, that's why we're standardizing all of the [pages], which we're almost done with, most of that transition, and a whole series of standardization.

And our legal process, and our attitude, and all of those things, you know. The way I look at it now, we're the underdog now, and the underdog -- you got to be the best people to deal with.

Perry: Let's talk a little bit about advertising. The question all of us have, I think, is why did you buy Advertising.com? What does it mean to you to now have Advertising.com under your wing; what problems do you forsee running it as a separate company?

Miller: First I think, you know, buying an outside dotcom is a sign of commitment that we have to the advertising market, there's that connection. I think also it's a sign of the commitment that the parent has to us. It was quite remarkable -- it was a truly remarkable day for me because the board meeting at 3:00 on that particular day and, and, although I did the original presentation seeking approval of the deal, and my boss thought [Don] Logan was going to call me after the [Time Warner] board [of directors] meeting to tell me what happened, right? And the board meeting was scheduled for 3:00. And he called me at 3:02. And I thought, "Oh, my God, he needs more information, those numbers are wrong." But there was no debate, no dissention, none.

And that is a remarkable change from where the company was vis-à-vis the board, you know, the whole nature of things. So, that's kind of that background.

[In addition to algorhythmic searh] there's this other form of performance-based advertising and Advertising.com is on top of that absolutely, and there's focus on costs from acquisition. In the end, you advertise to get customers. That's what you do it for and that's what they focus on, and it's a real stand-alone third party business that is growing very well against that.

In addition one of the things about AOL is we have not utilized our inventory to the best effect and we need to do that better for us, we need to do it better for our customers, and Advertising.com has a lot of systems that we can leverage to do that.

Perry: I'd like to talk a little bit about your perception of where the industry is going. Talk a little bit about how you see it from your leadership role with AOL.

Miller: You mean Internet or Internet advertising?

Perry: Internet advertising.

Miller: Internet advertising. I think that it's a great market, because there's a relationship going on between two electronic media generally, serving the Internet specifically. But I think the thing that we've got to all do -- all of us -- is realize that we're just getting started, and we can't just assume that… the money's just going to come our way because we're here and capturing share should take place, but we've got to work for it, we've got to work towards, we've got to devise the standard systems, create the marketplaces, make it a much better place to advertise, get brand advertising to mean something.

All these are not done yet, and I think the mistake would be to assume that just because there's kind of wind at our back, all things fall into place for all of us. I think both sell-side and on the buy-side there's a lot more work to be done.

A lot of things start with a big boom cycle, you know, and everybody thinks everything's going to happen overnight, and then it kind of craps out, and then what emerges out of that are real businesses that take time to build, that go one step and then another step, but keep going. And that's the stage that I think we're in. I think we're in the phase of building real things, but we can't take it for granted. I think it's huge.

Perry: We've completed the Millward Brown study and gotten fascinating information from the marketers as to where they perceive the share should be coming from. Can you talk to us from your seat at AOL, where are the dollars coming from.

Miller: You know, we don't know whether they're coming or waning from. We just know that they're coming in and you see there's much more, and I that it's a larger share from electronic media overall, and from print media, newspapers and magazines. And that's self-centered. You know I've been in the electronic media businesses for a long time, but I was familiar with the print side… and think broadband enters into it.

Perry: Jon, your competitors have a big head start on you in terms of advertising. How is AOL going to close the gap? What are you going to do to change that situation?

Miller: I think that, if you mean by that Yahoo and Microsoft, I think they got religion two years earlier than we got religion on how to be in the marketing game. They have their two years in front of us, and I think we're moving rapidly now and catching up with some things we've talked about, you know, the attitude adjustment, the systems, putting all our assets into one AOL Media Network Group so that it's managed centrally. We're looking to cross all our brands, looking to cross all of our inventory. So I think that's there's all of that, and also, we're getting much, much better every day at how we use what we've got, and optimizing across our network, cross selling, so, there's a lot of work just in that.

On top of that, one good news we're celebrating in really this past year is we're getting pretty good at programming Internet content. Every year that we've gone into it and, like, well, tuned up and really focused on the programming; we've shown tremendous results, it's surprising. If you said say, yes, this is a client sub-base with only a limited part of the Internet to address, so-called, you know, behind the wall, our program numbers have really taken off.

So we're really getting in much deeper in the Internet now with people that we've [unintelligible] a better advertising environment, more [unintelligible]; all those things are just kind under present circumstances.

Perry: So if this is going to be a market share game and evolve that way, how are you going to differentiate yourself at AOL, how are you going become a different player in the market?

Miller: I'm not sure it is a market share game. I think that in a growth market you don't have to win the share. It's only when growth falls down that you get into the share game. I still think we have growth, the market has it; I'm not sure it's share again. That said, I would love the big share. I mean, our first thing is to stabilize shares, because we did lose shares over the past few years. And I think we are now stabilizing share. The next goal is to grow share, and you know, we're competitive, we want to do that, we want to become leaders again, we want to do it the right way, by really participating in the marketplace.

So we're going to do it in the ways I've talked about, and our programming-rich environment and a brand rich environment. And brand rich, we're AOL and Netscape and MapQuest. People who don't know about MapQuest -- MapQuest is a portal. You take out the portals in the advertising network like Amazon.com. eBay's the No. 1 site in the U.S., MapQuest is the No. 2 site.

So we have a lot of assets that we can really mine better. AIM is a messaging service. It's never been a great advertising medium; we're going to try to beef that up for advertising. That's an extraordinary medium -- you know, people are getting into messaging like crazy. It's becoming natural for young persons now and a few people of our age.

Tomorrow: Content outside the "walled garden," and how broadband and wireless affect integration.