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Business Impact

AOL shutting 3 services to cut costs, focus on ads

NEW YORK (AP) _ AOL is shutting three data-storage services, including one of the Internet’s earliest photo-sharing sites, as it seeks to cut costs and focus resources on its advertising opportunities.

AOL Pictures, the year-old media-sharing site BlueString and the online backup service Xdrive will likely shut down by year’s end, though the company is looking to sell at least Xdrive, which AOL bought in 2005 for an undisclosed fee.

Company officials denied speculation Friday that the closures were meant to prime AOL for a sale. AOL parent Time Warner Inc. has been in continual discussions with both Yahoo Inc. and Microsoft Corp., though the talks have been preliminary.

“The decision to sunset these products is 100 percent part of a strategy that began last year to focus on the areas where we can win and to move away from products or features that are not contributing to our growth,” AOL spokeswoman Trish Primrose said.

AOL began taking a hard look at its portfolio following a 2006 decision to fully shift the company into an advertising business and pare down its legacy Internet access services.

AOL Pictures began in 1998 as You’ve Got Pictures and came at a time Internet users had few options to share their digital photos. Since then, services like Yahoo’s Flickr and Google Inc.’s Picasa have emerged, joining offerings from Eastman Kodak Co. and others.

BlueString launched last year as a repository for other media files such as video and music as well, but it never gained much traction.

Nor did Xdrive, which offers 5 gigabytes of free storage for backing up files.

All three services suffered from the fact that while data-storage costs have come down, those costs still add up, and the services contribute relatively few opportunities to display advertising.

Transition details are still being worked out. AOL likely will give existing users a way to migrate files to a competing service. It also plans to let users order a DVD of files for a fee and give instructions for downloading copies of individual files. AOL plans to formally inform its users of the changes in September.

AOL said it has already shut down about 50 products, projects or brands since 2007, mostly older or little-used products like its AOL Communicator mail software.

In a July 14 memo to employees, Executive Vice President Kevin Conroy said the company now had an obligation to ensure that “every product makes a direct impact on our bottom line.”

“There was a time at AOL when the strength of our aggregate portfolio of products more than compensated for the weakness of an underperforming product,” Conroy said. “The realities of the industry and market shifts in online advertising no longer make that possible.”

Conroy said AOL saw greater opportunities in areas like its video search engine Truveo and its browser toolbar, which drives traffic to search.

The memo, obtained by The Associated Press, was published earlier on the blog TechCrunch.

Separately, AOL said it would rein in costs for its Weblogs unit, which runs specialty blogs such as Engadget and Autoblog. The blogs generally pay freelancers per post. Although the unit’s budget has been increasing, so have the number of posts – such that costs have spiraled. The company is asking bloggers to post less often for now.

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