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Tim Armstrong's New Strategy: Can Video Save AOL?

AOL
CNBC.com
AOL

Today Tim Armstrong presented a new strategy to get AOL on track, unveiling an unprecedented investment in video in an exclusive interview on CNBC.

AOL is launching a new video ad format in partnership with Publicis' division VivaKi, hoping to drive more spending on video ads.

And the company announced more than 15 original video series for the web, featuring names like Jennifer Lopez, Heidi Klum and Mark Burnett.

They'll be distributed across AOL and Huffington Post websites, with advertisers like State Farm and Sony on board.

Armstrong is trying too stake a claim in made-for-web video — the space between YouTube, which is primarily amateur video, and Hulu and Netflix , which bring TV shows online. Now AOL is rolling out a slate designed to appeal to specific audiences to draw targeted advertising — women with Heidi Klum or Arianna Huffington, men with 'The Engadget Show' and teens with a 'Cliffs Notes' show from Burnett. Armstrong says AOL has "been the largest single investor in content brands on the internet" — and that content will become AOL's central theme.

Will it work?

Today at least, Wall Street isn't buying AOL's new video focus — the stock is now trading down more than five percent. And with AOL's stock down 53 percent in the past 12 months Armstrong faces an uphill battle convincing investors that today's strategy could spark a turnaround.

Armstrong has gotten some impressive names on board — who wouldn't want Mark Burnett producing a series — but we'll see if these shows draw eyeballs. One question is whether people can be convinced to watch a new genre of show. Websurfers know exactly what they're getting when they click to an ABC sitcom on Hulu or they watch a cat falling asleep on Youtube. But people haven't been trained to watch "webisodes" in the same way. There's no doubt that people have plenty of time to waste watching video online, but this is still a developing genre of content.

Will the power of brands like Klum, J-Lo and Burnett be enough to draw people looking to read an article on one of AOL's sites, to watch a video? Will it keep them coming back? It's far more expensive to produce web video than articles for the web, but it could yield a much higher reward, depending on how much AOL has to spend to promote the video.

Investors were disappointed by the slow growth of AOL's display ads after the company last reported earnings. In each successive announcement AOL will be facing even tougher scrutiny. So the bar's higher than ever for this video strategy to work. But this time AOL isn't just trying to expand on a proven entity — display ads — it's trying to push online video in a new direction.

Questions? Comments? MediaMoney@cnbc.com