America Online 2009 Annual Report Download - page 7

Table of Contents
in connection with this restructuring initiative, prior to hiring of new employees in areas of strategic focus. In addition, we plan to reduce our cost base in the
United Kingdom and cease or reduce operations in a number of other countries. Specifically, we plan to reduce our presence in Europe by significantly
reducing our operations in France and Germany and ceasing operations in a number of other countries. In certain of these countries, we are currently
consulting with employees or employee representatives in accordance with applicable legal requirements.
Background
Historically, our primary strategic focus was our dial-up Internet access services business which operated one of the largest Internet subscription access
services in the United States. As broadband penetration in the United States increased, we experienced a decline, which we continue to experience, in
subscribers to our access service. At the same time, online advertising experienced significant growth. In August 2006, we fundamentally shifted the primary
strategic focus of our business from generating subscription access revenues to attracting and engaging Internet consumers and generating advertising
revenues. In connection with this shift, we began offering the vast majority of our content, products and services to consumers for free in an effort to attract
and engage a broader group of consumers. Although our primary strategic focus has shifted, our subscription access service remains an important source of
our total revenues and cash flows.
Prior to the spin-off, Time Warner had been evaluating potential transactions involving, and structural alternatives for, AOL, including the possibility of
separating the global web services and subscription access services businesses, which share infrastructure such as data centers and network operations centers.
Historically, the global web services business had three units: the first focused on content published on a variety of websites with related applications and
services; the second focused on social networking, community and instant communications products and services; and the third focused on providing
advertising services on both our owned and operated properties and third-party websites. The subscription access services business included the AOL-branded
Internet access service as well as CompuServe and Netscape Internet access services.
In April 2009, Tim Armstrong was appointed our Chairman and Chief Executive Officer, and he commenced a review of AOL's strategy and operations
while Time Warner continued its evaluation of structural alternatives. Time Warner's evaluation resulted in the announcement on May 28, 2009 that it would
move forward with plans for the complete legal and structural separation of AOL from Time Warner.
In connection with this strategic review, which factored in Time Warner's decision to spin off AOL, we updated our organizational structure and
developed the next phase in the strategic shift begun in 2006. Our strategy remains focused primarily on attracting and engaging Internet consumers and
generating advertising revenues, with our subscription access service managed as a valuable distribution channel for our content, product and service
offerings. As a result, we currently operate as a single integrated business rather than as two separate businesses.
Our Strategic Initiatives
Consistent with our strategic shift to a business focused primarily on generating advertising revenues, we have begun executing a multi-year strategic
plan to reinvigorate growth in our revenues and profits by taking advantage of the migration of commerce, information and advertising to the Internet. Our
strategy is to focus our resources on AOL's core competitive strengths in web content production, local, consumer applications, advertising and paid services
while expanding the presence of our content, product and service offerings on multiple platforms and digital devices. We also aim to reorient AOL's culture
and reinvigorate the AOL brand by prioritizing the consumer experience, making greater use of data-driven insights and encouraging innovation, including
through AOL Ventures. Particular areas of strategic emphasis include:
• Expanding Our Exclusive Content Offerings. We are expanding our offerings of relevant and engaging online consumer content by focusing on
the creation and publication of exclusive original content.
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