To understand the significance of what’s happening at America Online, look to the past. Comparable to working for Coke at the birth of the soft drink industry, for Ford at the outset of the automobile industry, or for GE in the early days of consumer electricity, employees at AOL are riding a once-in-a-generation opportunity. In the young and rapidly expanding universe of the Internet, AOL leads the revolution.

But whereas Coca-Cola took a long time to spill over from that first drugstore fountain, Model T’s ambled off the production line at a methodical pace and GE laid down electrical service one grid at a time, AOL’s growth resembles a detonation.

Fifteen years ago, AOL simply did not exist. Today, the company has 18 million subscribers and stands as one of the top ten media brands in the world. In 1999, AOL will add over four million subscribers – that’s about equal to the circulation of Time, or USA Today and The Wall Street Journal combined. AOL’s stature is gaining on NBC, ABC and CBS. But the young company’s success goes beyond brand recognition and membership growth. AOL does what few other Internet companies do: it turns a profit.

In fiscal year 1998, AOL’s balance sheet tipped to black with net revenue of $96.8 million. In addition to subscriber fees – the majority of AOL’s 18 million members pays $21.95 a month for unlimited access – the company derives revenue from two other sources: merchandising and advertising and e-commerce sales. Analysts suggest that in the future AOL will phase out merchandising revenue, use subscriber fees to offset operating costs and rely on advertising and e-commerce sales to produce the company’s profit margin.

A tall order perhaps, but America Online’s sales force is up to the challenge. In fiscal year 1996, the department’s first year, sales clicked at $102 million. Sales revenue more than doubled in 1997 to $256 million and blasted to $541 million in 1998. Media analysts predict that AOL’s sales could double again for fiscal year 1999. America Online also carries a fat wallet in its hip pocket with an advertising and e-commerce backlog of more than $1 billion. Over 660 companies now advertise on AOL, including 93 that spend more than $1 million annually.

Is this amazing performance beginner’s luck? Hardly. AOL’s and the sales department’s success stem from a carefully articulated mission statement, excellent management, an empowered and energetic sales force (with an otherworldly work ethic) and a fanatical attention to the basics of sales, including most importantly, meeting the customer’s needs and helping them succeed. In this exclusive feature, Selling Power spoke with AOL’s customers, top sales executives, sales managers and reps and attended an AOL national sales meeting to learn more about what propels this organization.

Mission possible
“We have only scratched the surface in achieving our vision: To build a global medium as central to people’s lives as the telephone or television…and even more valuable,” says America Online founder, Chairman and CEO Steve Case in AOL’s 1998 annual report. If Case’s mission sounds far off in time – if not farfetched – consider the results of an August 1998 Roper Starch survey that found respondents preferred a computer connected to the Internet over the telephone and the television if stranded on a deserted island. The revolution is well underway.

Despite being a late arrival to the AOL’s revenue stream – before 1996, AOL relied solely on subscription fees and merchandising – advertising and e-commerce sales are now crucial to funding the revolution. The company’s rapid subscriber growth and captive audience gave the online company something to sell. In 1996, AOL brokered its first significant advertising deal: a three-year, $100 million agreement with Tel-Save-Holding, a relatively unknown long-distance phone company. With that deal, the floodgates opened and big deals flowed freely, as large advertisers saw the benefit in partnering with AOL. (See sidestory, “Partnership has its Advantages.”)

Inevitably, AOL experienced growing pains. Myer Berlow, AOL’s senior vice president for interactive marketing, joined the company in 1995 and found AOL to have enormous energy but little process directing it. “This place was entrepreneurial to the point of confusion,” Berlow said in a 1998 interview with Fortune. Steve Case charged Berlow with building the sales department from scratch. Today, the advertising sales department, which is based in New York and includes offices in Chicago, Dallas, Detroit, Los Angeles and San Francisco, has 38 outside sales personnel and 20 inside sales representatives. (In total, there are more than 200 people in AOL’s Interactive Marketing Department, including the sales, account services, business development, strategy & planning and operations divisions.)

Instilling a process
Berlow recognized the need for experienced sales management and, in 1998, hired 42-year old Paul Corvino to head up sales efforts supporting AOL’s range of interactive brands, including the flagship AOL service, CompuServe, AOL.com, AOL Instant Messenger, AOL NetFind, Digital Cities, ICQ and Netscape Netcenter. A veteran media sales professional – Corvino joined AOL from the post of corporate director of sales for Cablevision Systems and was previously a managing director of advertising sales at the New York Times – he immediately began defining the young department’s mission and channeling its energy from reactive to proactive strategies.

“Entrepreneurial companies like AOL are very good at tactics like turning around on a dime, which you have to be able to do, but what they’re not good at is having those tactics add up to an overall strategy,” says Corvino, vice president and general manager for AOL Interactive Marketing. “My job was to set a mission for the department, and that mission is to increase the number of targeted, consultative sales calls to increase revenue and have happier, more satisfied customers. Everything we do – from how we organize the department, create compensation plans or run training programs – every tactic we employ has to roll up to that mission.”

Julie Michaelson, an AOL regional sales manager who joined the company in 1996, credits Corvino with a more focused sales department. “Paul gives us clear goals. We know exactly what is expected of us to achieve our mission. He has added process, consistency and support to the sales organization, but still maintains the entrepreneurial spirit that is vital to our success,” she says.

Change at Netsonic speed
Staying nimble is indeed vital to AOL’s continued success, particularly in an industry where everything can change before breakfast. Corvino accepted that no amount of process could control the industry’s wild rocket ride; the best he could hope for was a secure seat. “The old rules don’t apply,” says Corvino. “The only consistent thing about this business is that it’s inconsistent.”

From the start, Corvino discovered several areas that called for change. “During the first sales call I went on for AOL, the rep started talking about technology – about third-party ad serving and animated GIFs – and I had no idea what was going on,” he says. “As I drove home, I was wondering what I’d gotten myself into. But then I realized that if I’m selling broadcast, I’m never going to talk about the tubes or the wiring; I’m going to talk about the programming and the market it reaches. Suddenly, I realized it’s not about technology. It’s about marketing, and we’ve got to take this thing that sounds complicated and make it sound simple again.”

Corvino encourages AOL sales reps to steer clear of high-technology terms, including Internet and e-commerce. “I prefer they say, ‘Let me show you how to sell your product over the computer,'” he says.

That’s a refreshing approach in the new media industry, says Matt Gore, director of business development for Worldspy, an impartial research and shopping Internet business and an AOL customer. (See Sidestory “Partnership has its Advantages.”) “Some reps try to impress you with their knowledge of the inner workings of the computer. They try to overcomplicate things,” says Gore. “AOL’s strategy is more like traditional media. It’s a direct, bottomline approach.”

Hiring experienced hands
To better serve the market, Corvino increased the number of outside sales reps from 15 to 38 and inside sales reps from five to 20. If sales double as expected in 1999, the average sales volume per salesperson (inside and outside) will be a whopping $17 million. Because AOL was competing with other forms of media, Corvino sought experienced sales talent from successful print and broadcast companies. Phil Frank, AOL’s national director of sales, says the migration of media sales professionals to the Internet was inevitable. “Our medium is evolving,” he says. “Prior to 1997 the industry had a lot of people who didn’t really have sales experience. They came from technology backgrounds or straight from graduate programs, and this was their first endeavor in sales. AOL led the evolution and set the standard by hiring top sales people.”

AOL sales management hired proven sales professionals from media powerhouses, including Time Warner, Condé Nast, the New York Times, ABC and CBS. John Sedlak, who recently left the Wall Street Journal, where he closed sales in the seven-figure range, to join America Online as a sales rep where he has the chance to close eight- and nine-figure deals, says the training he received selling print media proves invaluable in selling new media. “The traditional media side taught me to look at a customer’s needs and analyze them from a marketer’s perspective,” says Sedlak. “That training gave me some real tried-and-true means for defining objectives and strategies.”

While Corvino looks for proven sales experience, he’s grateful for the fresh perspective he’s gaining in the new media world. “In traditional media, people do things the way they’ve always been done. Here, people think outside the box. The mix between the people with technology backgrounds and those with media backgrounds is refreshing. They’re learning from each other and it’s this balance that’s really clicking,” he says.

SWAT teams
AOL sales reps must also rely on one another to keep abreast of the rapid changes in the company’s product line. (See Sidestory, “A Snapshot of Perpetual Motion.”) When Corvino arrived, sales reps sold by brand, so that, for example, AOL.com reps sold banners, buttons, co-branding opportunities, e-commerce and media partnerships only on AOL.com. Corvino broke sales responsibilities into categories – packaged goods, travel and automotive, for example – and further divided the categories by four regions. The result: a more focused sales force that gives greater value to the customer and relies on teamwork to help close sales.

“We’ve got so many capabilities in our arsenal – products like AOL, Netscape, CompuServe – and they all do different things, so its tough for one person to know everything,” says John Sedlak. “By being assigned to a category and by having counterparts in other regions, we’re able to get further involved in the industry. We attend trade shows and other functions, and there’s a system in place to share information with your counterparts.” In each category, the four regional sales reps report to a business development specialist, whose role is to help set strategy, ensure that the reps follow that strategy and keep everyone informed of industry and account developments. Additional personnel from interactive marketing departments, including sales strategy and account services, round out each of the teams, which Corvino has dubbed SWAT teams for their ability to rapidly respond to market shifts – and use the Intranet to keep products under control.

The ABC’s of selling AOL
In addition to organizing the sales force by category and region and simplifying the product by avoiding high-tech language, Corvino wants the sales force to make their work easier and more effective by adhering to sales basics. “The sales process is very basic; Paul is a big believer in this,” says Julie Michaelson. “It starts with targeted prospecting, then setting up appointments.” Corvino compiled a database of the top 4,000 prospects weighted by spending and potential to spend dollars online. “The average rep has a list of approximately 200 accounts, each ranked in order,” says Phil Frank. “We have action plans and goals set for each account.”

Just doing the first step in the sales department’s mission – increasing the number of targeted, consultative sales calls – will improve any sales force’s effectiveness, says Corvino. “It’s not rocket science. More meetings equals more contracts.” On average, AOL’s reps make nine sales calls a week, up from 4. 2 a year ago. In total, Corvino estimates the sales force conducts between 150 and 160 sales calls and signs roughly 30 new deals each week.

Once in the door, AOL sales reps listen carefully to the challenges the prospect faces in their business. “We always begin a meeting by probing, uncovering needs,” says Michaelson. “We respond with custom presentations and proposals. As long as we do our job and always keep the customers goals and objectives as a first priority, the steps of a sale come easily. We try to underpromise and overdeliver.”

Happier, more satisfied customers
A sales rep’s ability to understand and respond to the customer’s needs is a primary characteristic for success, says Phil Frank. “I listened to thousands of media sales pitches in the (advertising) agency world, and the best salespeople were the ones who were engaged in the client’s business. Our ideal reps approach business with an interpretivemindset. They’re working to understand the customer’s needs and proactively address them,” he says. AOL customers find their reps always accessible.

“AOL is extremely responsive,” says Worldspy’s Matt Gore. “We never wait more than an hour to hear back from Steve (Silverberg, AOL sales rep to Worldspy). In my experience, online buys can be some of the most time-consuming media buys. Once you do the buy, the work is just beginning. To make it work, you’ve got to monitor it constantly. If your sales rep and account team doesn’t work with you, it’s not going to be successful.”

As an AOL Shopping Channel tenant, Worldspy sells office products and services through a direct link to their Web site. Matt Gore works with AOL on a weekly basis to evaluate what’s working, what’s not and to change accordingly. In addition to close contact with Steve Silverberg, Gore works with AOL’s account services department, which comprises marketing, advertising and media professionals whose sole job is to get results for the partners. “Account services works very closely with our customers to test creative, work on promotions to drive traffic, and make our products perform for the partners,” says Corvino. “We need our partners to be successful to have viable long-term business, and account services is a feature we sell. There is no other service like it in the industry, or in traditional media, for that matter.”

The role of management
Responsibility for managing the sales process falls on the four regional sales directors. They report to Phil Frank, who in turn reports to Corvino. At the start of each week, sales managers sit down with their reps to discuss how the previous week’s calls fared and which prospects from their targeted account list they’ll call on in the coming week. Through regular contact, managers are able to keep their finger on the pulse of sales, track rapidly changing industry developments and get a sense as to what type of training the sales people need. “We have a great ongoing training program,” says John Sedlak. “Some of the programs in the last few months alone have included consultative selling, negotiating, presentation skills, a teamwork seminar and many product knowledge training workshops.”

AOL salespeople are an empowered group. “Interactive media is new enough that many companies do not have the systems in place to buy it, so people at the highest levels know they have to be involved,” says Corvino. “Not only do our salespeople get in to see customers, they often get to senior management.”

Corvino revamped the compensation plan to reward salespeople for sticking to the tactics that add up to achieving the department’s mission. The plan rewards for revenue, deal volume, teamwork, consultative selling and daily activities, including volume of sales calls, training, paperwork and follow through. AOL pays salespeople a lucrative base, sales commissions and provides a generous stock option plan. One salesperson, who did not want to be quoted, said that during the past four years her total income including stock options exceeded $10 million.

A missionary’s work ethic
In return, Corvino gets a dedicated work force willing to put in long hours. “I’m working between 70 and 80 hours a week,” says John Sedlak. “There’s a work ethic here that I’ve never encountered. There’s so much happening in our industry that you’re afraid if you kick off early, you might miss something.” Julie Michaelson estimates she’s working 10 to 12 hours a day. “But you never watch the clock, because…it’s an exciting place to be,” she says.

Corvino, who’s in the office from 8 a.m. to 8 p.m. and online working from 11 p.m. to 1 a.m., agrees. “Right now, I can’t distinguish between work and play. I don’t believe my staff can…and I don’t believe the people above me can distinguish between work and play. We’re working these hours, but to us, it’s not work because we’re really enjoying this.” It helps that the entire organization recognizes that their work is moving toward the mission of building a medium as important as and more valuable than the telephone and television.

“It’s rare in a career that you get to be in on the beginning of something,” says Phil Frank. “Especially something that will change industry and culture. Everyone here respects that opportunity.”

Corvino believes that the historical significance of everyone’s work motivates more than the financial rewards. “Sure, the stock options are a tremendous upside, but that’s not the reason people are performing at the level they are achieving,” he says. “We all feel we’re doing something important, making history and changing the way people live, the way they do commerce.”

Challenges
Despite the enthusiasm, Corvino, Phil Frank and the regional sales managers guard against burnout. “To be honest, because our sales staff is so young, we haven’t experienced employees burning out, but we’ve still put processes in place to prevent it, namely a lot of training in time and territory management,” says Corvino. “We’re teaching our salespeople how to make the best use of their time and how to make each day productive.”

Even in the highly stressful inside sales environment, sales reps are working ten and more hours a day. Heidi Gregory, AOL director of national advertising sales and head of the inside sales department, makes herself available to her staff at all times. “They know my door is always open for them. They let me know their frustrations, the obstacles they face and the good things, too. We try to tackle as many as we can together,” she says. “I also encourage them to take a 15-minute walk around the building or outside to refresh for a bit,” says Gregory. “It’s amazing what that can do for your mind.”

Another delicate balance sales management must maintain is keeping the entrepreneurial spirit in the sales organization while putting processes in place. “The last thing we want to be is not lean enough to move quickly,” says Phil Frank. Corvino agrees, adding that fostering an environment where management rewards salespeople for taking risks and allows them to fail helps maintain that spirit.

The road ahead
AOL also must guard against complacency in its ranks. As the undisputed leader in cyberspace, the online giant is the target of everyone’s competitive plans. “New ventures are exploding onto the scene, consolidation is changing the landscape, mergers are bringing in major media giants and the markets are trying hard to figure out who the winners are likely to be. It is not a time to be standing still or resting on our laurels,” writes Steve Case in AOL’s 1998 letter to shareholders. “There’s a little bit of Andy Groves’ philosophy at work here – that you have to have a certain element of paranoia in your culture to survive,” says Frank. “Steve Case and Bob Pittman (AOL’s president and COO) set up a culture that guards against complacency. They’re always talking about how we should be very proud of what we’ve accomplished but we should also be respectful of the opportunity before us. It’s hard to be complacent in only the second inning of the game and when you know there’s a lot more to achieve.”

Of course, America Online’s competitors are working just as hard and, increasingly, just as smart. Analysts point out that there will eventually be a Pepsi to AOL’s Coca-Cola, but the entire sales team is far too busy to spend any time fretting over a future that changes constantly with the exponential leaps that technology makes. Paul Corvino captures the pace best as he settles on a metaphor for the AOL sales organization. “It’s as if we’re building an airplane while we’re flying it.”