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paidContent - Interview: AOL's Armstrong First 100 Days: 'People Are Missing The Real AOL Story'

This story was written by Staci D. Kramer.
Sixteen cities in ten countries, from Baltimore to Bangalore, Denver to Dublin. 26 Town Hall and All Hands meetings. 71 product reviews. 51 partner/customer meetings. The numbers charting Tim Armstrong’s 100-day immersion course as the latest chairman and CEO of AOL (NYSE: TWX) sound impressive but what do they add up to for the company on the verge of separating from parent Time Warner? Nothing as meaningful as in the next 100 days and the 100 after that as Armstrong and his team follow through on the consumer-centric strategy that emerged as he covered all those miles:

—Expand AOL-owned content through Media Glow [Translation: Don’t screw up what’s working.]
—Grow and third-party network [Translation: Platform-A didn’t work.]
—Push local and mapping [Translation: Don’t forget we own MapQuest]
—Focus on AOL e-mail, AIM and ICQ [Translation: People Networks didn’t work.]
—Start AOL Ventures with focus on innovation [Translation: Avoid becoming Island of Misfit Toys.)

Where are mobile and international? They should be part of everything AOL does, Armstrong told paidContent in a lengthy interview as he spent the last of his first 100 days trying to set the stage for the phase that starts this Monday. We talked about unwinding People Networks and Platform-A; giving Bebo breathing room; the reasoning behind AOL Ventures, which we’ve confirmed will include Bebo and Userplane; TMZ’s future; whether more layoffs are inevitable and much more. (Our sister site mocoNews has more on mobile.) Edited excerpts follow. We also have Armstrong’s 100-day memo to the staff and a memo detailing who’s who on his staff.

Staci D. Kramer: Is there anything you like about AOL or liked about AOL the way it was before you came in?
Tim Armstrong: There were several things. That’s part of the reason why I came. One is I actually thought AOL had done a nice job of improving the content on AOL so there was starting to be a better user experience. By the way, I’ve been a longtime fan of Engadget and some of the other AOL properties in general; so I actually saw some kernels of things I actually used or looked at, at least, on a regular basis before I got here. One surprising thing when I got here is there were more things, especially in the content space, that were stronger than I had thought.

Do you feel like AOL wasn’t doing a good job of getting the message across that they had these good things or of letting these good things get the attention they needed at the company?
I think there is a clear and clean split between what gets written about In the business community, which happens to be what a lot of us read who work in this industry, there’s the favorite story about AOL, which you know and I know—Time Warner AOL deal, did it work well, did it not work well; AOL subscriber base, did it work well, did it not what I would call the normal AOL stories, which got the vast majority of attention. The good thing is there are a bunch of stories which never got written, which is where some of the strengths of the company are: great content, very scaled ad system, big distribtor in local, growing communication properties around the globe, other properties like WinAmp or ShoutCast, which are big in specific categories—especially in international regions. A lot of people in the business world know the traditional AOL story; I think what people are missing is the real AOL story, which is what we’re starting to tell and think about now.

Some of the things Randy (former CEO Randy Falco) and Ron (former COO Ron Grant) did picked up Jon (former CEO Jon Miller) and his team; you’re getting some credit for some of the things that were already well in place when you got there. I just saw a Bloomberg story that said you’ve been adding niche content and they were adding niche content.
I would say are there things in the past that worked well and we’re continuing to do? Yes. I think that would be an injustice not to do those things. I think the one thing that was missed on the content side of the equation, which is an important part of the future of the internet is the scale of the content. They had a niche strategy but they didnt really have a scale strategy.

How does what youre going to do differ from that?
We’re much more focused on the technology underneath the content than just the content.

Can you give me an example?
I don’t want to go into too much detail here but we are looking at different ways to scale the content technology.

To scale it within AOL or to do it so it can be used outside of AOL as well?
I would say we’re looking for overall scale.

When I heard about Relegence (shutting down the product side), I wondered if there was a way for other people to make use of that technology.
By the way, I think Relegence is a company within AOL that had really lost a lot of prominence and had been put on the wayside. Relegence is one of the companies that is a little more core to what the future strategy and plan is.

More core when it comes to the technology but not to the concept of the business itself?
More core to the overall platform strategy.

Do you plan to continue things like the lifestreaming efforts, the direction the home page was headed in?
When I came in here, the strategy was People Networks, Media Glow and Platform-A. I think after being here 100 days and listening internally and externally, that our strategy has changed a little bit on the People Networks front. We’re not combining instant messaging with social networking right now, which was actually happening when I got here. We’ve sort of unwound that because it wasn’t successful for consumers. We’re looking at communications as more of e-mail, IM and SMS. On the content front, Media Glow is a core aspect of what were doing but we’re thinking about technology in a different way with Media Glow. On the Platform-A side, I think there was a construct to put owned-and-operated inventory and mix it directly with network inventory and I think that we are unwinding that as well.

I don’t mean to sound really dense about this but I still dont get the technology change with content. When you talk about Media Glow as the core aspect, using technology in a different way
We would expect to have a very sophisticated and scaled content management system under Media Glow.

So taking what had been building for a while, say Blogsmith or the other things that were there, but building something more robust and sophisticated?
Let me describe it a different way. Technology around content management systems has been here. It has not been a central focus and I don’t think it’s been a singular focus in terms of the singulrity we’re putting on it, having a very robust content management system. I’m not trying to be swerving around your question here, but it’s also a core strategy so I’m not going to get more detailed on it.

Platform-A, & TMZ

Does Platform-A go away?
I think one of the things we’re actively looking at right now is what is Platform-A. My general sense of a platform is it’s one system, everything’s hooked together, it works seamlessly together, and it’s integrated well. Many parts of Platform-A are there but we’re not there as a total whole yet. I think also the notion of Platform-A in the marketplace was this integrated approach integrated nicely across the high-quality inventory, the user-generated inventory and that is an area we’re actively looking at. The Platform-A strategy is something we are changing right now into more of an owned & operated focus and more of a network focus.  Is the Platform-A brand name going to be around in the focus? I dont know the answer to that right now but it’s something we’re actively discussing.

Are you going to go back or go ahead to a point where you have,  and other advertising is broken apart more than trying to show it as a seamless effort?
Let me just be really direct about this: is the largest-reach network in the United States. It’s a big opportunity for this company and it’s a big opportunity for our advertisers. That platform in relation to how it deals with very high-branded, high-integrated advertising, it’s really if you think about our owned and operated, it’s really more experience-based advertising and integrated advertising in a lot of cases, and the network is more about scale. We’re concentrating our efforts on from a technological-reach perspective and we’re looking at the owned-and-operated properties from a more deeply integrated, experience standpoint for advertising.

Are you disappointed that AOL is no longer selling advertising for one of its own properties, TMZ, and is that something that might happen more?
No. As a matter of fact I think we have to look at TMZ from an ownership perspective so if you ask me is TMZ selling their own ads a good thing or not a good thing in relation to AOL, I would say, ‘If the value of TMZ increases, its a really good thing for us.’ I would also say that TMZ has a television property and an online property and, as you know, the properties that have television plus websites tend to sell more integrated packages. AOL currently does not have a real strong foothold in TV so if TMZ’s able to sell that, that’s beneficial to us. I know the TMZ people well, I’ve talked to them multiple times and I think that’s a partnership we’re happy with. The second piece, we have a substantial property in Popeater that’s maybe twice the size of TMZ from a traffic perspective so we are very focused on monetizing Popeater and the entertainment properties. If you take a step back and look at the marketplace of how TMZ maximizes revenue and Popeater maximizes revenue with TMZ having television. I think it makes sense that TMZ may be better off selling on its own.

Is there anything that could change with the TMZ ownership as a result of AOL spinning off?
That’s a joint venture so I dont know yet how the ownership of TNZ will change if we spin off but that would strike me as an era we’d have active discussions with TMZ and Time Warner on.

Too many brands?

Can AOL have too many brands?
I would say only if they dont work.

By having all these different brands, are you geting past that image some people have of not wanting to have anything that says AOL on it?
No, no, no. First of all, I think we have a basic philosophy here, which is the web is going to get more fragmented over time. People are going to figure out how to serve unique audiences in faster, better, more concrete informational ways and that is a strategy that fits very well with what we have been looking at with Media Glow properties and other things. Fragmentation on the internet is good for us. We believe in it and we’re riding that trend. The second piece of it is the AOL brand and AOL properties tend to be very large properties say AOL were a restaurant and we put a sign outside our door, there are restaurants that people want to go eat in that dont have an AOL logo on their door. That’s just reality. If you take Black Voices or Spinner or WinAmp, is it helpful to consumers to have AOL connected to these things? In some cases yes, in some cases, no. What we’re trying to do is put the right sign outside our establishment so the right audience understands what each different brand means and spends time there.

Some people like the Cheesecake Factory and some people want to go to that cool new restaurant that just opened.
I dont know what the span of restaurants are in the United States where people spend money but there are major chain restaurants that make a lot of money; there’s other places that are niche establishments that serve a specific clientele and that’s one way to think about how we’re serving our consumers.

Web + ISP = 1 business

Do you see AOL with the web business and the ISP business as two businesses or one business?
I look at it as one business. I look at the access business as a paid-for membership base that actually uses our products and services so it’s really distribution.

Do you see yourself getting out of the distribution business any time soon?
I hope not.

It still throws off a lot of money.
Actually, the money is less important than the distribution. It’s an incredibly engaged audience with a very high household income, very good demographics. They spend money on things, they look at our content, they convert, they shop, read. I think we are in a good space with those consumers now to actually improve their experience. 

Do you have any sense of when advertising revenue will make up for the ISP decline?
I have no clarity on that right now. The first concentration we have at the company right now is getting the products and services improved. That relates to the ISP business as well to the revenue business. Our first strategy now is getting the strategy, structure and products correct—and then that will have an outcome on the revenue and the access business.

Do you feel like traffic is growing organically or is it being propelled by other aspects?
There’s a spectrum of things at AOL that get traffic from other places. The properties that have grown up here as web-based services get a lot of organic traffic, a lot of traffic from search, they look like the most sophisticated internet properties. But there’s other areas which we know havent been updated to the level they should be, which we’re working on they should be getting more of their traffic from the access business or other distribution that AOL has done historically. That’s a great form of distribution and right now we’re augmenting that towards more web-based distribution as well.

AOL Ventures

What does a unit have to do to be part of AOL Ventures? What is AOL Ventures?

We’re still deciding what goes in there. AOL Ventres serves three purposes: one, to connect us with the innovation community across the globe. Ventures is not just a U.S.-based thing it will be European, Israel, India, Asia. The second thing, assets we have inside the company that were acquired or started internally which had a purpose of some synergistic relationship with things inside the company and either the synergy wasn’t executed or the synergy has changed over time but they’re still great businesses. We’re trying to give them kind of a corral where they can live and grow and really act like a start-up without being constrained to the larger strategy the company has. Number three is, we’re looking for areas of business that we’d like to support the strategy areas or other areas we think are going to be important and do seed level or Round A investing in startups and universities to make sure we have a pipeline of potential acquisitions, innovation and partnerships. We will take investments from outside sources in the current businesses we have if it will help improve and prosper those businesses.

How does Bebo fit into that?
Bebo is in an incredibly competitive space. Bebo has a stronghold in certain countries around the globe but I think the Bebo team in general could benefit from being in an environment where they can purely focus on Bebo and growing Bebo. There have been distractions for Bebo in the past, which have been closely tied to trying to integrate it and the integrations havent always worked well. We are in the process of letting Bebo focus on what Bebo is really good at.
Why didn’t that integration work well? Was it a bad idea to begin with?
I wasn’t here for the history of that. In every business, if there’s things you dont try and dont do, you dont learn anything. I think the company has learned a lot from just figuring out the overall social networking and the communications area has worked.

$850 million is a pretty expensive way to learn, though.
The $850 million was not spent to make IM more successful. It was spent to make social networking more successful at AOL. The $850 million acquisition was not an experiment. It was AOL getting into the social networking arena. I don’t want to cast it as an experiment.

Now that you’ve inherited it, do you see ever getting the money out of it?
I think in general from a strategy standpoint, Bebo offers a strong foothold in the social networking space. Right now, I dont think there’s any current plans to try to monetize Bebo. [ie Sell it.] We certainly are interested in Bebo growing and having great products and services but I’m not interested in what the company acquired it for last year and you can sell it for today. We’re interested in what the consumer experience is with Bebo and how it fits into the larger landscape of the internet and with AOL’s properties.

Does Bebo get a new CEO or a new head?
No. We dont have any announcements to make now.

Would (video search engine) Truveo be in there?
Truveo would be another potential company in there. We’re still finalizing. There’s not tons of finalization around these things.

Still working out the details

I think people were sort of expecting you to appear fully sprung from the head of Zeus on Monday with a 20-plage plan about everything that was going to happen to AOL from here out. It sounds to me what we’re actually hearing is here are the areas we’re going to focus on; we’re not laying out definitive plans yet.

There are definitive plans and I think we will be rolling those out. We will clearly be making announcement when we’re rady to make them but the 100-day process was really about listening and deciding our strategic areas and I think we’ve done that. The 100-day play was really listen internally and externally, figure out where the strengths of the company and our partnership strengths are, create a strategy around those areas and new areas we could be successful at, and really get into the structure of the company and the actual financial planning from a revenue and cost standpoint. We’re at the stage right now where we have the strategy set, we have a lot of the structurals things set and we’re ready to start doing more of the structure and planning.

Are more layoffs inevitable?
I don’t think we have a lot of comments to make on that right now.  As I just said, we went strategy structure and then financial structure around revenue and costs. We’re going through that process right now and we dont have any specific things to talk about right now but we’re going to be working hard on those areas in the next two months.

By Staci D. Kramer

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