AOL the future

It's another depressing week at my old home in Dulles VA, as AOL lay's off a suspected 700+ employees.  It's a tough one.  AOL usually "purges" staff at the end of each year, only to hire people back the following year. It happened when I was there and seemed to almost be an annual event..but why?

AOL used to be the internet! Everyone used AOL to log onto the internet via a modem. Then the business model changed... people dropped dial up for faster DLS, mainly provided by the phone companies. Then the cable companies delivered broadband, now over fiber providing very high speeds.  AOL started to become redundant as an ISP, (internet service provider), so needed to switch it's business model from subscription basis to advertising.

Jon Miller, a friend of mine for 16 years was hired to run AOL in 2002 and charged with the "turn around", from a subscription to revenue building advertising model. Jon, who is one of the smartest people I know and a superb strategist, did this over a three year period, maintaining the return number to Time Warner and managing overhead costs.  By the time Jon left AOL, he and his team had grown advertising through a strategy of high profile targeted programming and in his final quarter alone advertising revenues had grown 45%.

When the new management came in, it seemed that almost through bitterness to the old regime, (definitely I was surprised at some comments publicly and privately made by new COO Ron Grant towards Jon and the old senior management), everything that had been built up was pulled down.  Targeted programming gone, network advertising as a strategy, junior management promoted to senior, (after the mass exodus by senior execs), and momentum seemed to fall apart.  More importantly than the momentum, revenue fell off the cliff.

I have made fun of before on this blog, of AOL's purchase of BEBO, a 3rd rate social network from the UK, predominantly used by kids in the UK.  They paid $850MM, which was $500MM more than I had been offered it for my SPAC fund only six months or so earlier. Decisions like this from the new AOL management seemed to everyone in the industry as insane... and now it seemed that everyone was right. 

So it does then look like AOL needs a reboot. It's always a horrible thing to do when you lay people off, but from a business point of view, if you are continuing to grow your business it's excused.. but, when you are tanking you business, and getting rid of personnel, people tend to look at the management and ask questions as to why they are still employed???

I think it's time to get a new management team in AOL, get a COO who has actually run a company before, a CEO who understands the business he is in, and at Time Warner real movement to sell AOL.

Here is the latest rumor mill

Thoughts