Former AOL chief back in the saddle at News Corp.

Jonathan Miller, who architected and executed AOL's massive transformation from a subscription-based walled garden to an online ad business, will lead News Corp.'s Web properties, including MySpace.

Miller, who was fired abruptly in November 2006 as AOL CEO by parent company Time Warner, has been appointed chairman and CEO of News Corp.'s Digital Media Group, as well the company's chief digital officer, News Corp. said Wednesday. The move had been rumored in recent days.

Many found Miller's termination at AOL befuddling, particularly because the Time Warner division was at the time on an upswing -- after an extremely complicated restructuring -- and because his replacement, Randy Falco, was a TV industry veteran with minimal experience in the Internet market.

It seems, however, that Miller is having the last laugh. Shortly after his firing, AOL's performance began to deteriorate, lagging the market in online ad growth, and it hasn't picked up. Meanwhile, Miller, with his reputation pretty much intact, became a founding partner of Velocity Interactive Group, a digital media and communications investment firm. A now lapsed noncompete clause in his AOL contract prevented him from working for competitors until recently.

Falco, who had been president and chief operating officer of the NBC Universal Television Group, ended his lackluster AOL run last month, when he was replaced with Google's Americas operations president Tim Armstrong.

In 2006's third quarter, the last full one under Miller's four-year tenure, AOL's ad revenue grew 46 percent. For the 2006 fiscal year, AOL had ad revenue growth of 41 percent, faster than the 35 percent growth of the overall U.S. online ad market at the time.

Under Falco, AOL routinely failed to grow its ad revenue on par with the industry average. In 2008, AOL's ad revenue shrunk 6 percent, while the U.S. online ad market saw spending grow almost 11 percent. In addition, Falco oversaw two major rounds of layoffs, which shaved off a total about 2,700 jobs at AOL.

At News Corp., Miller is replacing Peter Levinsohn, who will stay with the company as president of new media and digital distribution of Fox Filmed Entertainment.

Miller will report directly to News Corp.'s Chairman and CEO Rupert Murdoch. In addition to MySpace, Miller will be responsible for IGN Entertainment, Photobucket and Hulu, which is a joint venture with NBC Universal, ironically Falco's previous employer.

Unquestionably, Miller's priority will be MySpace, which, like many other social networks, is still trying to find the right vehicles to monetize its massive user base. It has become obvious that conventional forms of online advertising, like sponsored ads and banners, aren't particularly effective in social-networking sites.

For this reason, MySpace, Facebook and other such sites have been experimenting with different formats and concepts in order to engage their members more actively with the advertising on their sites. This remains a challenge for MySpace and the others.

Copyright © 2009 IDG Communications, Inc.

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