Peter Kafka

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AOL CEO Tim Armstrong Live at D8

Tim Armstrong

Good news for AOL CEO Tim Armstrong: His predecessor, AOL founder Steve Case, thinks the Google veteran has a chance to turn around the company. The bad news: He has a very long way to go.


11:14 am: Apologies, technical difficulties–joining late.

11:15 am: Armstrong is traveling back in time, discussing AOL (AOL) prior to his arrival. The company was managed based on gross revenue and page views, and that may work for some, but those metrics didn’t make sense to me.

Kara: Such as?

Armstrong: The Bebo acquisition looked successful, because page views were shooting up, but unique visitors were dropping down. Photo galleries with 80 photos into it. That sort of stuff. We’re pulling back on that stuff.

Kara: You’ve been pulling back on a lot of stuff. Revenue is down, too. Not a bad idea to go to zero so you can build back up.

Armstrong: Hopefully we don’t go to zero. But (former Gap CEO) Mickey Drexler gave me good advice. He told me I’d be under a lot of pressure to move the numbers up and that I should resist it.

11:17 am: Kara–anyone from Google (GOOG) you didn’t hire?

Armstrong: We need people who are passionate, but also willing to play on a team. The analogy I use is “when I got to AOL, there were a lot of people playing golf.” We need people on an orchestra or a football team.

11:18 am: Kara–I’ve called this the best management team to run a digital lemonade stand. You have a big team and a small business.

Armstrong: Compared to Time Warner (TWX), it’s a small business. But it’s still a large business: 100 million unique users in the U.S., etc. Bigger point: We have the largest opportunity on the Internet. But I tell investors that they shouldn’t be expecting quarter-after-quarter results. That’s not what we’re doing.

11:19 am: Kara–Okay, so what’s the opportunity?

Armstrong: It’s melding technology and journalism. Local efforts via patch. “We believe the local marketplace for journalism is important, and the local marketplace for services online is important.”

11:22 am: Armstrong–Beyond local, there are other areas that we can move into to fill unmet needs. Like religion–big opportunity there.

Kara: So how are matching tech with journalism?

Armstrong: We’re marrying demand algorithms with…

Kara: Like Demand Media?

Armstrong: They’re more search-based. We’re trying something else. But also giving editorial people better data. When I was at Google, I used to go to meetings at publishers where sales people had reams of data, and the journalists had none. There’s a lot of fear that some journalists have about technology and data, but they can use them as tools. But “the fear is where the opportunity is….There’s no reason why technology can’t fuel opportunity.”

11:26 am: Kara–So how do you sell all this stuff?

Armstrong: We service a lot of large audiences, but have technology that lets you delineate that audience and just serve who you want. And we also have models that let brands get next to the appropriate content.

Kara: You mean putting brands in the story?

Armstrong: No. Church and state is important. Brands next to stories, getting brands in front of the appropriate audiences.

11:28 am: Kara–You’re selling off Bebo. Will anyone buy it?

Armstrong: We’ve said we will sell it or shut it down. We’ve had interest from people who are interested in buying it. We’ll see how that turns out.

Kara: What about other stuff you might sell?

Armstrong: We’re keeping stuff that’s valuable. Mail and communications are important to us.

Kara: Social networking, given that you’re selling Bebo?

Armstrong: Very valuable. But it will be a joint strategy. Being a principal in a social network is something that we’re clearly not focused on.

Tim Armstrong at D8

11:29 am: Kara–What about search? You helped sign that big Google deal.

Armstrong: Last week, we kicked off the process of the search deal. We are meeting with multiple partners.

Kara: So you’re not re-upping with Google?

Armstrong: Google has been a great partner for 10 years. There’s a disadvantage in that we know what works and doesn’t work, and so do they. So now we need to compare both our needs, with Google and others.

Kara: There are only two partners, right?

Armstrong: There are probably more than two that we’ll talk to [like who?]. We’re valuable to search partners because the AOL audience performs very well for search. We perform more strongly than our market share implies.

Kara: Will you want a guarantee like the original deal?

Armstrong: We have a rev-share deal. There may be upfront payments, there may not be. But either way, those upfront payments are usually about market. They’re not core to the arrangement.

11:33 am::Kara–How do you look at Google and what they’re doing?

Armstrong: One of the things that Google has done a really good job with is taking risks, and you know, push, push, push. Like a lot of successful companies.

On the outside, as a partner, you appreciate that innovation. On the partnership side, you have to realize that you’re one partner out of a lot of partners that they have. And that’s the piece of it where personal relationships really matter. With them or other partners.

11:34 am: Kara–What about risks they face?

Armstrong: Risk for any company that size is how do you keep innovating? When Mark Zuckerberg was up here and you guys were hammering him, that can make you want to retreat. And you have to keep innovating.

Tim Armstrong at D8

11:35 am: Kara–AOL used to be innovative and important. The brand is tarnished now. Can you revive it?

Armstrong: Two different brands. By the way, before I officially left Google, I had a lot of people telling me to kill off the brand. But then I traveled around. And I found that there’s the brand that media people know about, and the merger, etc. And then there’s the brand that everyone else knows, and they have warm fuzzy feelings about it.

11:37 am::Who are your competitors? What do you think of Yahoo (YHOO), etc.

Armstrong: We have partnerships with Yahoo; we compete with them for users and advertisers. But AOL is not in a situation where we need to give advice or comment to people about what they ought to be doing. Yahoo is a big, strong company, though their strategy is much more focused on what we’re doing now, which is great.


Q: Are you doing anything about the Gulf oil spill? Are you doing anything with your local journalism to help people with that? (seriously).

A: We’re covering it nationally. But we actually are working with someone locally, where there’s a girl in a town, where she’s raising money for the Gulf, and it’s not a town on the Gulf, but we’re trying to help her.

Q: Can you talk about AOL culture and how it’s changed since you got there?

A: At Google, I was managing 2,500 people. Now I’m managing 4,700. So I’ve learned that cultures are okay when they’re moving–up or down–and everyone knows what the plan is. They don’t work when there’s no plan. So people who don’t want to stay and don’t like the plan need an opportunity to leave. This is “Full Metal Jacket.” Turning this company around is not going to be easy. It’s not going to be eight-hour days.

Tim Armstrong at D8

Q from Kara: Management style?

A: I’m collegial. But at the end of the day, sometimes I need to execute and get it done. Like when I came aboard, there was a $400 million check I had to sign for a distribution deal. And then I asked people at a meeting to speak up about it and tell me what they said. There have been many cases where I’ve had to make decisions without a collegial environment. But the culture is getting better and collegial.

Q&A over.

A note about our coverage: This liveblog is not an official transcript of the conversation that occurred onstage. Rather, it is a compilation of quotes, paraphrased statements and ad-lib observations written and posted to the Web as quickly as possible. It is not intended as a transcript and should not be interpreted as one.

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