AOL has taken another step closer to selling off its ICQ instant messaging service, culling seven bids to four “serious” ones, said sources close to the situation.

The price for the service is hovering just under $200 million, several sources said, with one bid higher.

An AOL spokeswoman declined to comment.

BoomTown reported news of the sale of ICQ by AOL (AOL) in November, part of a deleveraging of units from the newly independent Internet company as it focuses more on its content and advertising business.

While other reports a month later said the sale was closer to completion than it actually was, the process is proceeding in a more traditional manner, with bidders making proposals to AOL’s investment bankers, Allen & Co. and Morgan Stanley (MS).

Sources said that the solicitation of bids is now over and that there are four “serious” ones, which one person close to the situation described as a “U.N. of buyers.”

Translation: The bidders are likelier to be international Internet companies rather than from the U.S.

That’s because ICQ–which has 40 to 50 million active users across the globe–has a stronger overseas business, especially in Germany, Russia, Eastern Europe and Israel.

While I could not get the exact names of those left in the running, the most obvious possibilities include:

Russian investment group Digital Sky Technologies, which has invested in both Facebook and social gaming site Zynga; China’s huge Tencent-owned QQ instant messaging and gaming service; Naspers, a multimedia giant known as the MIH Group and based in South Africa; Seznam, the largest Web portal in the Czech Republic; and, perhaps, Yandex, Russia’s leading search engine.

In the U.S., some felt Google (GOOG) would be a bidder for ICQ, though it was Yahoo (YHOO) that apparently made a much lower offer, which took it out of the running.

In any case, the price will likely be much lower than what AOL paid in 1998.

The then-powerful AOL acquired ICQ, which was one of the most explosive online communications tools, for $287 million, with another $120 million in earnouts for the team. It was part of a Tel Aviv, Israel, start-up called Mirabilis.

But ICQ’s popularity in the U.S. lagged compared with rival services from Microsoft (MSFT), Yahoo and Google. In addition, Facebook and Twitter have become major players in the status-update space.

AOL’s AIM service, in contrast, is quite strong, typically clocking in as one of the top instant messaging properties.

ICQ is still based in Israel with about 100 employees and is moderately profitable. Bidders, sources said, are now talking with the ICQ team as part of the process.

Zynga, which is closely held and based in San Francisco, is behind casual videogames like FarmVille and Mafia Wars, which have become popular time-wasters on Facebook and MySpace. It says that more than 230 million consumers play its games each month.

The company makes money through online advertising and sales of virtual goods in its games, and it said it will use DST’s investment for further growth.

Read the rest of this post on the original site

Note to readers and/or Engadget editors: This liveblog is not an official transcript. 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. Cool? Cool.

Q: Why leave Google, which is awesome, for AOL, which is not?

A: The Internet is still at an early stage. AOL is a global brand, and that’s hard to build. We have a unique set of assets. AOL can be core and central to where the next $50, $100 billion are going. And we have unique talent to make a run at it.

Q: Please explain your strategy.

A: “Content, ads and communication.”

Q: Why is this turnaround different than other AOL turnarounds?

A: I can tell you whatever, but you need to see metrics move to believe me. But we have a good strategy. “You have to maniacal about the piping,” and in the past AOL wasn’t. We had terrible integration of acquisitions, systems. You want to be able to take $25, $40 million ad deals and run them through the piping and we haven’t been able to do that.

Q: Please explain AOL’s content strategy.

A: We launched our content platform last night. A single platform. It uses data, helps scale to content producers and will work with thousands of partners. It differs from Demand Media et al in that we already have scale for production and scale for advertising. We can snap those two platforms together. [Note: No mention of robots yet.]

Q: Is AOL interested in video or other self-produced stuff?

A: Sure. Video’s important to us. We’re also interested in what we would call “niche at scale.” As a collective whole, we have 70 or 80 properties and will go up to 100. We want to aggregate uniques that will be attractive to advertisers. We want to own the equivalent of the top 80 or 90 cable channels on the Internet. We’re also very interested in local, via Patch [which Armstrong invested in before AOL bought it].

Q: How do you market all this content?

A: By the way, everyone thinks our traffic comes from the access business. That’s not true. It’s a minority of our traffic. Also, when you produce your own content, you can distribute it and get traffic back. You also need to make this stuff shareable on the Web. We’re getting mass scale distribution from platforms like Twitter and, of course, search.

Q: There’s a big gap between your monetization and Yahoo’s (YHOO). How do you change that?

A: I can’t tell you! It’s how I got my job. Ho ho ho. Okay: AOL went to a network-based strategy a couple of years ago, which cut into the pricing yield, and that is now changing. We addressed this in the summer and fall. Also, AOL, shockingly, had under 1,000 customers on ad platforms when I showed up–700, actually. At Google (GOOG), we had millions. So we had a clear dialogue about what had happened. Also, the salesforce needed to be restructured, different tiers of the salesforce. And we also needed a self-service option you can use with a credit card. “Look, this is why they hired me….If we can’t make that business work, I think we have big issues.”

Q: What’s up with search?

A: We like Google and are still talking to them. We’re also talking to “other partners.” Last time, the deal was done “purely for money,” and that had benefits and some downside. This time, the pricing may be different, but it’s not the only thing that determines value.

Q: Please be more specific.

A: Okay. We’re really big on music. But if you go to AOL search for music, you get a subpar version of Google’s search for music. There are too many ads on the page. So why don’t we set up a onebox-like search box and send people to AOL music? For example, let’s think about trading search dollars for display dollars. We want to make money on ads in a much more natural and healthy way.

Q: What about investments in content?

A: Sure. We’re making nominal investments in content and a putting a lot of money in technology and infrastructure. In terms of M&A, we will sell off stuff that doesn’t make sense and do tuck-in buys.

Q: How does your local strategy differ from others?

A: We do real local, not quasi-local. We put editors in communities to actually get the stuff and monitor and update platforms. “It’s a risk, it’s a bet,” but early results are promising.

Q: Your ad business is much less profitable than that of your peers. What up?

A: Our hamburger stand says “really cheap burgers at really cheap prices,” but we’re actually serving sea bass, and we should be charging for that. We told customers, via Platform A, etc., that they could buy us really cheap. Also, cost structure: We’re taking out a third of the business. Access was making money, and things “kind of got loose” at the rest of company. But advertising can be nicely profitable with content and we can do that.

Q: Okay, but when do ad biz profits become self-sustaining?

A: Not in 2010, but sooner than five years. I own two percent of the company, and I want it to work. Morale is already better than when I got here.

Q: Are you removing all premium inventory from Ad.com?

A: Don’t believe what you read! Internet! Bad! An analyst said we might do it. What we’re going to do is “sell Superbowl product at Superbowl pricing.” [i.e., a nonanswer]

Q: What’s up with the access business and the traffic it generates?

A: We have 100 million users. Five million people get “paid services” from us. Half of those are dial-up users. But people think that 70, 80, 90 percent of traffic comes from access. That’s not the case.

Q: What’s up with mobile?

A: We want to increase consumer mobile traffic. We have lots of Apple Store downloads. We’ll do more consumer downloads/traffic. And we’ll build our mobile ad business after that, probably in 2011.

Q: What do Federal broadband access plans mean for your business?

A: All of us believe that there will be some “tail” of dial-up access for some time. But it’s not going away, and the decline is actually moderating [which makes sense--if you're still on dial-up now, what are you waiting for?]

Q: Please reiterate profitability plans for display/content/ads.

A: In reality, we’re “marginally” profitable now, but that’s not good enough.

Q: If you reprice ad business profitability, what does that mean for you?

A: I don’t want to set goals, but we’re not off by single digits. It’s significant.

Q: Talk about your communications business, please.

A: We have AIM, ICQ, email–all big opportunities. We need to clean up current products and services. Communications products “were recipient of problems” in the past. AOL tried to jam Bebo and AIM together, which didn’t work. We also slammed our stuff with way too many emails. I tried AOL email when I started and got 15 to 20 ads. Not a great user experience. It’s “project hygiene.” We also believe people want a unified platform across devices and we’re working on that.

Q: Talk about compensation.

A: I had the money options at Google, which got moved into AOL options at market value. Plus salary blah blah. I didn’t take a bonus this year “because I don’t think I should have gotten paid for laying off a third of our employees.” [All of this is discussed in the proxy, no?]

Q: Here’s a softball about your management team. How awesome is it?

A: Totally awesome. We’ll add more over time. On the engineering side, I was surprised that we weren’t chasing good engineers when we got here. “We have spent a lot of time and energy on the subject matter.” Culturally, our “internal mojo turned around,” and now the engineering community gets that we “have a big-hair problem” but that we have tons of use so things they do here have a big impact.

Q: Brand strategy: How do you extract brands people don’t know about while promoting the main site and vice versa?

A: We think about this like Disney (DIS), I think. By the way, there are two brands. The financial media brand is battered–worst merger in history, etc. But consumers like the AOL brand. Tomorrow, we’re giving AOL users a a 50 percent promotion via Target (TGT) on “very good toys.” So in the Disney way, there’s the brand people like, and we have other brands people like, just as Disney has ESPN. So we’ll have non-AOL brands launching, and we’ll refurbish the AOL brand itself.

Q: Whither MapQuest?

A: MapQuest is still Top 20 search term. It has a large market share. The technology has not been focused on in a number of years. We’re changing that. Partners are inquiring about MapQuest, and I think what we’ll do is an operational partnership with them. We feel like its a “very, very valuable property.”

Q: What are best metrics to evaluate AOL’s turnaround/growth?

A: Unique visitors [which is what everyone says now]. We need a turnaround in domestic display, which you should see in 2010. And then we need to generate cash, because that’s what healthy companies do. In terms of that cash: No more “hail Marys” where we take cash from access and make big bets on things that we don’t know about [i.e., Bebo]. We will want to fund the Web services business with cash from the Web services business.

Kara began Monday with some of the hard facts from the pending AOL-TimeWarner (TWX) split. Stock issued for the post-spinoff AOL places the company’s total implied value at around $3 billion. Also on the list of stuff from 1994 being jettisoned from tech companies is the original instant messenger, ICQ. Kara reported that AOL seeks to shed the brand in an effort to keep the larger ship afloat. Over at Yahoo (YHOO), Kara opened the lid on CEO Carol Bartz’s shifting of top execs. In Silicon Valley’s house of cards, everyone watches out for a shuffle.

Over at Digital Daily, John brought some hard numbers to the stresses being felt by AT&T’s (T) 3G network thanks to a certain fruit-flavored smartphone. It seems that the iPhone is largely responsible for the 2,000 percent increase in data traffic in the San Francisco Bay Area compared with a year ago. (Weekend Update doesn’t claim sole responsibility.) Keeping up with layoff news these days is almost a full-time job. It’s a good thing Paczkowski is on the case. This week, Sony-Ericsson let roughly 2,000 employees go. The firm plans to shutter whole offices in both the United States and abroad. John finished strong with a whole slew of posts about the forthcoming Google (GOOG) Chrome OS, which was released in a developer’s beta this week. Next year, the good kids may be getting their stockings filled with Chrome rather than Apples.

You can never tell what MediaMemo will have up its sleeve in a given week, and this one was no exception. Peter came in early with reports that Wired magazine is another publication betting on a certain tablet. Wired may pave the way for other Condé Nast publication e-editions. From the department of “Hey, it looks like it worked for them,” a couple of music giants will release a Hulu-like service for music videos. No word yet on whether the Internet killed the video star. Peter closed it out this week with the fizzle that will be Oprah’s broadcast career. The talk-show-host-turned-deity will end her broadcast career in 2011, but may not be sorely missed by CBS, according to MediaMemo. Everyone is pretty torn up about Gail leaving though.

Personal Technology went a little off the reservation this week and covered an intriguing specialty gadget with a very specific target audience. The reading aid for the visually impaired is unusual for many reasons, not the least of which is that its branded Intel (INTC) both on the inside and outside. The reader uses a downward-facing camera to read text and translate it directly to speech. Walt was pleased with the device on the whole, though he encountered some bugs and a somewhat steep learning curve that may be a function of the novel nature of the product. Over at Mossberg’s Mailbox, the lead question this week was about data loss. Once the geek shudders stopped, Walt let the reader know that there are many alternatives to Apple’s (AAPL) Time Capsule drives, and the integrated Time Machine option is one useful alternative. At Mossberg Solution, Katie won a fight with a Pixi and brought us the blow-by-blow account. The cheap-and-cheerful version of the Palm (PALM) Pre features a stripped-down price. That savings came at too high a performance cost, said Katie. She praised Palms webOS, but came down on the side of spending a little more to get the Pre.

Stay tuned and check back often. Weekend Update will be back next week as long as we can make it out for the Black Friday sales with all our fingers and toes.

The voluntary layoff program begins Dec. 4, a few days before the company spins off from Time Warner (TWX). If AOL doesn’t get enough volunteers, it will ax people on its own.

This is lousy news for employees, who are faced with a “jump now or wait to be pushed” decision, but it is designed to cheer investors: AOL says the cuts will drop its annual operating expenses by $300 million. Through the first nine months of this year, AOL’s operating expenses ran around $1.8 billion.

Meanwhile, AOL is looking to shed some parts of its business altogether. It has hired bankers to sell off its ICQ messaging service and is considering dumping MapQuest, among other assets.

Armstrong’s (expensive) goodwill gesture: He is giving up his 2009 bonus, which was to be at least $1.5 million. His explanation to employees: “As a member of our team and the person who takes accountability for the results of the company, I am making the decision to forego my 2009 bonus. That decision is a personal one and is not a sign for the future payout of the overall bonus plan for employees.”

Here’s the text of the company’s filing with the Securities and Exchange Commission:

On November 19, 2009, AOL Inc. (the “Company”) informed its employees of proposed restructuring activities as part of its continuing cost reduction initiatives aimed at aligning the Company’s organizational structure and costs with its strategy (the “Restructuring”). The Restructuring is conditioned upon the successful completion of the Company’s previously announced spin-off from Time Warner Inc. (the “Spin-off”), as well as the approval of the Company’s new Board of Directors that will begin service in connection with the Spin-off. It is anticipated that, if approved, the Restructuring will include the reduction of approximately a third of the Company’s current employee base, which will be conducted on a voluntary and involuntary basis. The goal of the Restructuring is to reduce ongoing annual operating costs by approximately $300 million. If the Restructuring is approved, the Company expects to incur restructuring charges of up to $200 million, substantially all of which is expected to be incurred from the date of the Spin-off through the first half of 2010.

AOL has hired a pair of New York investment bankers, Morgan Stanley (MS) and Allen & Co., to manage the sale of its ICQ instant-messaging unit.

Sources familiar with the situation said interest in buying the asset from two major non-U.S. companies prompted execs at the online service to put a process in place for a deal that will likely occur after AOL becomes an independent company in December.

AOL is set to spin itself off in less than a month from corporate owner Time Warner (TWX), and sources said selling off peripheral properties likes ICQ is part of becoming a smaller, more focused company.

Sources added that AOL now wants about $300 million for the property.

ICQ, which was once of the most explosive online communications tools, has lagged since AOL bought its popular software for $287 million in 1998, with another $120 million in earnouts for the team then. It was part of an Tel Aviv, Israel, start-up called Mirabilis.

While ICQ has about 40 million to 50 million unique monthly visitors and is the No. 1 messaging service in Germany, Russia, Ukraine, Israel and other small countries, its has less traction in the U.S. than bigger rival services from Microsoft (MSFT), Yahoo (YHOO) and Google (GOOG). In addition, Facebook and Twitter have also become major players in the status-update space.

AOL’s AIM service, in contrast, is quite strong, typically clocking as one of the top instant-messaging properties.

Said one source about the sale of ICQ, which is still based in Israel with about 100 employees and is moderately profitable: “AOL now has to be asking the hard questions.”

Those hard questions include massive layoffs, which BoomTown reported last week will take place soon. AOL then formally acknowledged the cuts, noting in a regulatory filing that Time Warner would take a $200 million charge for them.

Other AOL properties are also likely to be getting the once-over for sale, including its Bebo social networking site, which AOL bought for $850 million in 2008. But that is not imminent.

In the ongoing game of musical chairs among top managers at Internet companies, former Yahoo exec Brad Garlinghouse–famous for his controversial “Peanut Butter Manifesto,” which correctly chided the Internet giant for becoming so lugubrious several years ago–is taking a job at AOL very similar to the one he left at Yahoo last year.

Garlinghouse, 38, has been named president of Internet and mobile communications at AOL, putting him in charge of the New York-based Time Warner (TWX) online unit’s powerful email and instant-messaging properties, including ICQ and AIM.

He has only been in talks with AOL–which used Spencer Stuart’s Internet-top-exec-finder-in-chief Jim Citrin–for a few weeks, in a deal that came together quickly, he and the company said.

Garlinghouse, a longtime Web entrepreneur and exec, had reportedly been considering a number of start-up and venture-related jobs since he left Yahoo last summer after six years there.

Sources said he was seriously considering becoming the CEO of a mobile firm.

He was most recently at Silver Lake Partners, as an “in-house senior advisor,” the private equity firm that recently bought the Skype Internet telephony firm for $1.9 billion. Garlinghouse also reportedly helped work on that deal.

“It’s really exciting to be to able to rebuild and revitalize an industry giant,” said Garlinghouse in an interview with BoomTown earlier today. “I make no bones that these [properties] are in need of that…but there is also a huge opportunity to do something cool.”

Garlinghouse has to hurry. Despite being among the top communications players online–a group that also includes Yahoo (YHOO) and Microsoft (MSFT) and, more recently, Google (GOOG)–AOL has lost relevance with key audiences, even as social networking properties like Facebook and the microblogging service, Twitter, have innovated in the communications space.

The hiring of Garlinghouse, well known in Silicon Valley circles, is meant to counter that.

He will head up AOL’s operations from its Mountain View, Calif., campus–which is also the former HQ of AOL-acquired Netscape Communications–where, said AOL CEO Tim Armstrong, Garlinghouse will “be CEO of Silicon Valley for us.”

Between all its various properties, AOL has several hundred employees in the Northern California area.

Armstrong said AOL–which was founded 25 years ago on the East Coast and has tried and failed many times to get a true foothold in the West–thinks having an important player at the center of the tech industry is critical as it moves to spin off as an independent company by the end of the year.

“We have a triple play in getting a great executive, who is a master in the communications on the Web and who is well known out there,” said Armstrong. “Brad is our senior AOL manager there.”

Along with running all of AOL’s communications properties, Garlinghouse will inherit some of its community properties, although AOL’s Bebo social networking unit–now considered to be an overpriced acquisition error–now resides in its ventures unit, headed by Jon Brod.

Garlinghouse will also be aiding Brod, said Armstrong, with AOL on the lookout for acquisition opportunities in communications and other arenas.

While Garlinghouse declined to be specific about what would pique his buying interest, he was responsible for such big Yahoo deals as its $350 million purchase of Zimbra in the fall of 2007.

He was also key to bringing both Oddpost, which is at the heart of Yahoo’s email offering, and the popular Flickr photosharing service to Yahoo.

Garlinghouse said he has admired what Twitter and Facebook have done, but that they were not destroying traditional online communications, pioneered by AOL, as some assert.

“It’s a vibrant segment and this just means there are a lot of opportunities to enable integration,” he said. “I think of it as an expansion of online communications and I hope AOL can do more collaboration and partnerships.”

Garlinghouse also has to watch AOL’s basic products like email, which was recently passed by Google’s Gmail as the No. 3 email service in the U.S. Yahoo Mail is the top email, while Microsoft’s Hotmail is second.

How much Garlinghouse can do will depend on the future financial strength of AOL. Its advertising business has been hit hard in the econalpyse, with hopes it will return before its money-generating access business continues its slow decline.

Armstrong is now in the midst of looking over AOL’s cost structure and employee base, which most expect will eventually result in another round of layoffs and cuts.

He has been busy creating a different strategy for the company since he arrived earlier this year, as well as hiring (and firing) top execs to create a new management structure.

Now, that includes Garlinghouse.

So, for a look-see at AOL’s latest talent acquisition, here’s a video interview I did with him, just after Yahoo bought Zimbra:

And here’s the full press release from AOL about the hiring of Garlinghouse:

AOL NAMES BRAD GARLINGHOUSE AS PRESIDENT, INTERNET AND MOBILE COMMUNICATIONS

NEW YORK, N.Y.–September 8, 2009–AOL today named Brad Garlinghouse as President of Internet and Mobile Communications, spearheading AOL’s global efforts to expand the reach of its e-mail and instant messaging. Garlinghouse will also take on an expanded leadership position for the company, heading up AOL’s Silicon Valley operations from its Mountain View campus and serving as the West Coast lead for AOL Ventures, the company’s venture capital arm headed globally by Jon Brod. Garlinghouse was most recently at Silver Lake Partners as an in-house Senior Advisor.

Prior to Silver Lake, Garlinghouse spent nearly six years at Yahoo!, where he led that company’s communications and community products. Garlinghouse will report directly to AOL’s Chairman and CEO Tim Armstrong.

” Brad Garlinghouse is an all-star in the Internet industry with an unparalleled background and proven track record, having led Yahoo’s communications products to unprecedented growth,” said Armstrong. “In addition to leading our efforts to grow our communications products, Brad will be bringing his global leadership and business experience as a key member of our company’s executive leadership team. He will also be a major force for AOL in Silicon Valley, working to expand our presence there and in the tech community in general. We’re delighted to have Brad on board and know he’ll do great things for AOL.”

“It’s a tremendous opportunity to join AOL at this pivotal moment in its history,” Garlinghouse said. “Tim has set out a clear strategy and vision for where he is taking this company as it becomes independent again. I’m looking forward to working with him and the rest of the team to realize that vision.”

Armstrong, who joined AOL in April, identified Communications as one of the five key areas of strategic focus for AOL after an extensive 100-day review of the company’s business. Other focus areas include Content, Advertising, Local & Mapping and AOL Ventures.

Garlinghouse spent nearly six years at Yahoo! where he most recently served as SVP of Communications and Communities. Prior to that he served as SVP of Communications, Communities and Front Doors, which included the Yahoo! home page. He came to Yahoo in 2003 as VP, Communication Products. During his time there, Yahoo! Mail went from No. 3 to leading all competitors by a wide margin, and the company’s instant messaging service rose to become the leader in that market as well. Garlinghouse also oversaw the company’s Flickr photo-sharing service and Yahoo! Groups.

Prior to Yahoo!, Garlinghouse was CEO of Dialpad.com Inc., responsible for all aspects of the company’s operations, finance, sales and marketing. He was also General Partner at @Ventures, Category Manager of Media Development for the @Home Network, Inc., and Manager at SBC Communications.

Garlinghouse, 38, received his BA in economics from the University of Kansas and his MBA from Harvard Business School.

After his 100-day VisionQuest to figure out what to do at AOL, Tim Armstrong is in a chattier mood.

The former Google (GOOG) advertising exec took over the perpetually troubled Internet icon in the spring and has been on a worldwide tour of its offices, meeting employees and trying to get a lay of the land of where the Time Warner (TWX) unit has been and where it should be going.

So, BoomTown did not waste a New York–where AOL has its HQ, in fact–minute in getting on the horn with Armstrong to finally hear his take.

There’s not a lot of new stuff to reveal, of course, beyond what Armstrong has already said over the last months about AOL’s new direction.

That would be a spinoff in November, a focus on advertising, content, local, communications and starting a venture unit.

Here is the interview, which we did by phone on Friday:

BoomTown: So, what’s your overall assessment of AOL and its prospects after your 100-day look-see?

Armstrong: Well, to start, I feel good about the company and where we are at. What I mean by that is that I feel good about what the company’s opportunities are.

B: What were you most surprised by on the downside and on the upside?

A: I think basically things were about 50 percent more negative and 50 percent more positive than I thought.

On the negative side, it has mostly been a crisis of confidence. I think people at AOL had started to believe the business press that it was just an incremental part of the Internet.

On the plus side, there are very surprising assets, which have been neglected, but are amazing. Such as Winamp, ICQ and the really incredible engineering talent all over the world–in India, Tel Aviv, Dublin.

B: What was the one thing you took away as the most important thing to do first?

A: Well, it is important for everyone to understand that AOL should not be in every business out there. That there are a limited set of things we have to commit to do better than anyone else.

Over the years, for example, there were so many acquisitions. But a lot of them became businesses that we were not fully committed to, and we have to start making clear choices and letting the rest go.

B: Such as?

A: Well, we are going to be focused on scaling content, advertising, email, messaging and local, but making it easier and less complicated.

In the ad business, for example, we have 100 products. I think we can be much more successful with less.

And we have different publishing platforms all over the world, just as the Web has become about having centralized technology. We have been missing the core characteristic of the Internet, which is about one platform.

B: Talk a little about what you are doing in the content space. AOL, via its MediaGlow unit, has been creating a lot of small blogs in a variety of categories, but also has big sites.

A: We are going to do both things. One thing I would say is that we have a content strategy that spans the content we create, the content we are buying and partnering on, and I think we have clear plans in terms of investing in each area.

B: What about communications?

A: I think you are very quickly going to see us cleaning up email products. And in the messaging space, one of the things we will be doing is integrating it more with other AOL properties.

Historically, the management has looked at messaging as how to drive monetization and it has been a bad experience. I think that it more important as a recirculation tool.

B: How realistic were you about AOL when you arrived compared to now?

A: I went into this job with my eyes wide open and I am not saying now that I have answers to every problem.

But I have been trying to do what it takes to solve the big ones, such as recruiting and building a team. I have also spent a lot of time finding talent in the company already here.

And, I have worked with people outside the company. I consider my job being whatever it takes and educate myself.

B: So what’s next, besides the already announced spinoff? Is AOL still an acquisition target?

A: I look at it in two different ways.

We need to stay very laser-focused on strategy and execution, as well as innovation.

And we have to build this company as a powerful independent one.

AOL has been looked at as a target for a long time, where AOL has been the prey. It might also change in that we can be the hunter too.

B: What about the online advertising and search deal with Google?

A: Well, it ends in December of 2010, as everyone knows.

I have to say that the partnership has been extremely successful on many fronts.

They have been our partners for eight years and there has been a lot of momentum.

But we also have to think about how to continue that for the right outcome for what we need in future, because AOL has changed since the partnership started.

Of course, we will look at other partners, but we also really know we have a great relationship that exists with a partner that is also going to be listening to us about what we need.

Jim Bankoff–the well-regarded former AOL exec who runs an online sports news network called SB Nation–has nabbed $7 million in funding from investors to grow the company, including Comcast Interactive Capital, said sources.

There was also a Securities and Exchange Commission document filed on the transaction today, under the name Sportsblogs Inc., which you can see here.

The SEC filing noted that the money invested was $7.95 million. But sources said that the nearly million-dollar difference is for giving cash to early employees and founders and will not be used to fund SB Nation.

People familiar with the situation said SB Nation’s post-investment valuation, after this second round, will be $30 million and also include previous investors, such as Accel Partners and Allen & Co.

Its first round–which also included several prominent angel investors, such as former AOL exec Ted Leonsis and LinkedIn CEO Jeff Weiner–was $5 million.

SB Nation has used that investment to grow like gangbusters over the last year, especially since Bankoff arrived last fall as its chairman and CEO.

Depending on which survey service you reference, the site has between four and seven million unique visitors a month.

It has done distribution deals with Internet giants like Yahoo (YHOO) to goose that growth.

While it has been around since 2003, founded by DailyKos’s Markos Moulitsas and others, the Washington, D.C.-based start-up has been aiming more at the sweet spot of local sports pages, especially as newspapers have become weaker.

SB Nation also covers national sports, using a community network of blogs, analysis and news.

Comcast Interactive Capital, which is the venture arm of Comcast (CMCSA), will also get a board seat for David Zilberman.

Bankoff (pictured here) was a longtime AOL exec, ultimately in charge of programming and products there. He worked on such products as TMZ.com, Moviefone, MapQuest and Netscape, as well as its AIM and ICQ messaging offerings.

After he left the Time Warner (TWX) online unit, he became a senior adviser to Providence Equity Partners. Bankoff still has that role, but has been working full-time at SB Nation for a year.

While there were reports that the Time Warner board was meeting today to approve the spinoff of its AOL online unit, it actually gave the move an “enthusiastic endorsement” last night, according to sources.

Time Warner (TWX) just put out the press release about the move this morning, which has been long expected since former top Google (GOOG) advertising exec Tim Armstrong was named CEO of the long troubled AOL.

“Following the proposed transaction, AOL would be an independent, publicly traded company,” said the release, which gave few details of the shape of the new company.

But, several sources with knowledge of the situation said Armstrong is set to make massive changes to the structure of AOL, sweeping aside its current set-up almost completely.

That includes keeping the access business, which many thought would be sold off, and putting many of the companies it has recently acquired–including its pricey Bebo social networking site–in a separate ventures unit, which will try to attract outside investment.

The strategy will focus AOL on several key areas, including media, “scaled” advertising and communications.

Time Warner owns 95 percent of AOL, and Google holds the remaining five percent, but Time Warner said it would buy back that stake in the third quarter of 2009 as part of the transaction.

“Accordingly, once the proposed separation is completed, Time Warner shareholders will own all of the outstanding interests in AOL,” said the release. “The proposed transaction will be structured as tax-free to Time Warner stockholders.”

Armstrong is at the midpoint of a 100-day review of AOL, which has seen its profits and revenues drop in recent years.

That has meant a hard look at the structure put in place by his predecessors, former CEO Randy Falco and President Ron Grant.

They had cleaved AOL into three parts: the MediaGlow content studio; People Networks, which includes Bebo, as well as AOL’s communications assets like AIM instant-messengering service; and its Platform-A advertising unit.

Each has had its own president, and has been operated more independently.

That is effectively over, said sources, as had been signaled by the recent departures of People Networks head Joanna Shields and Platform-A head Greg Coleman.

Now Bebo, as well as start-ups AOL has bought recently such as the Userplane social-media apps unit and its Truveo video search service, will be “relocated” into AOL Ventures.

Each will operate on its own, and AOL will try to get venture capitalists to invest in them.

Armstrong has also decided to stress the AOL brand again, after years of creating a variety of new ones, and try to revive its other well-known brands, such as AIM and ICQ.

All the other parts of AOL will be integrated more tightly together, although the MediaGlow content business will get additional investment and still be run by Bill Wilson.

In addition, sources said it was unlikely AOL would make any big acquisitions after it spins out. Instead, it will focus on making key partnerships with a variety of companies.

Here’s the official press release:

Time Warner Inc. Announces Plan to Separate AOL
May 28, 2009

NEW YORK – Time Warner Inc. (NYSE:TWX) today announced that its Board of Directors has authorized management to proceed with plans for the complete legal and structural separation of AOL from Time Warner. Following the proposed transaction, AOL would be an independent, publicly traded company.

Time Warner Chairman and Chief Executive Officer Jeff Bewkes said: “We believe that a separation will be the best outcome for both Time Warner and AOL. The separation will be another critical step in the reshaping of Time Warner that we started at the beginning of last year, enabling us to focus to an even greater degree on our core content businesses. The separation will also provide both companies with greater operational and strategic flexibility. We believe AOL will then have a better opportunity to achieve its full potential as a leading independent Internet company.”

After the proposed separation is complete, AOL will compete as a standalone company–focused on growing its Web brands and services, which currently reach more than 107 million domestic unique visitors a month, as well as its advertising business, which operates the leading online display network that reaches more than 91% of the domestic online audience. AOL will also continue to operate one of the largest Internet access subscription services in the U.S.

AOL Chairman and Chief Executive Officer Tim Armstrong said: “This will be a great opportunity for AOL, our employees and our partners. Becoming a standalone public company positions AOL to strengthen its core businesses, deliver new and innovative products and services, and enhance our strategic options. We play in a very competitive landscape and will be using our new status to retain and attract top talent. Although we have a tremendous amount of work to do, we have a global brand, a committed team of people, and a passion for the future of the Web.”

Today, Time Warner owns 95% of AOL, and Google holds the remaining 5%. As part of a prior arrangement, Time Warner expects to purchase Google’s 5% stake in AOL in the third quarter of 2009. After repurchasing this stake, Time Warner will own 100% of AOL. Accordingly, once the proposed separation is completed, Time Warner shareholders will own all of the outstanding interests in AOL.

The proposed transaction will be structured as tax-free to Time Warner stockholders. The transaction is contingent on the satisfaction of a number of conditions, including completion of the review process by the Securities and Exchange Commission of required filings under applicable securities regulations and the final approval of transaction terms by Time Warner’s Board of Directors. Time Warner aims to complete the proposed transaction around the end of the year.

According to an internal memo obtained by BoomTown, Joanna Shields, who came to AOL via its troubled acquisition of the Bebo social-networking site, will be returning to London to spend more time with her family and to “pursue entrepreneurial interests.”

(She is pictured here with former AOL CEO Randy Falco and former AOL President Ron Grant after Bebo was bought in 2008.)

Until recently, People Networks has been the third leg of the Time Warner (TWX) online site’s businesses, which also include advertising and content.

But under new CEO Tim Armstrong, who was one of the top sales execs at Google (GOOG), AOL is largely abandoning its business-unit approach for a more functional and centralized structure.

Armstrong is prepping AOL to be spun off, and has been trying to shape it into a more streamlined organization focused on core assets but run in a more top-down fashion.

Bebo has always been a thorn at AOL, since it was acquired for $850 million last March. It was a huge price for the social-networking site, which was much smaller than leaders Facebook and MySpace.

Ironically, Shields, who negotiated the deal, got a lot of internal flak for getting that much for Bebo. That doubtlessly got worse after both top AOL execs who bought it from her, Falco and Grant, got pushed out in favor of Armstrong.

Under Shields, People Networks–which also includes AOL’s AIM and ICQ instant messenger services–has been introducing a variety of social products and updated offerings.

It is now poised, as you can read in Shields’s memo below, to release a new version of AIM and ICQ.

Here’s Armstrong’s full memo to the AOL troops below, as well as Shields’s memo to her staff:

Team -

We’re now near the half-way mark of our 100 Day Plan, and we’re making good progress in putting together the details behind the strategic priorities I talked with you about two weeks ago. I’m looking forward to speaking to you more about this later this week at a company All-Hands on Friday.

In the meantime, I want to update you on some organizational news. Joanna Shields has decided to step down from her role as President of People Networks/EVP of AOL and return to London to reunite her family and explore her entrepreneurial interests. At her core, Joanna is a start-up executive, having taken numerous companies through the process of rapid growth and acquisition.

Following the company’s acquisition of Bebo last year, where Joanna served as chief executive, she moved to New York to help AOL unlock the value of our social assets and re-establish AOL as a leader and innovator in the area of social networking and communications–two areas this company pioneered. The result was numerous innovations in AIM and ICQ, the launch of Socialthing, along with continued upgrades to Bebo. I’m happy to say that Joanna will continue to serve as an advisor to the company working with our acquisitions and new ventures, so while we won’t be seeing her on a daily basis, she will remain an important member of the AOL family.

Joanna is a very strong and well-known entrepreneur and has been a very valuable member of our executive team. Please join me in thanking Joanna for her many contributions and wishing her safe travels as she moves her family back to London–TA

Dear Team,

I wanted to let you know that after much deliberation and with a heavy heart I have decided to move on from AOL. I am returning home to London to reunite with my family and pursue my entrepreneurial interests.

It has been a remarkable year and I feel incredibly lucky to have spent this time with you. I have been blessed to be part of many success stories in the past from RealNetworks and Google through to Bebo and my time with you at AOL will go down as one of my proudest.

People Networks was born a year ago to solve some of the toughest problems facing online consumers today. Despite (and perhaps because of) all the innovation we’ve seen in the last few years there are too many online services to monitor, too many profiles to manage and too many “social graphs” to maintain. The web is an amazing platform for content, community and communications, but these three rarely happen in one place, resulting in online conversations that are fragmented and disconnected. Our vision was to connect people with everyone and everything they care about and through a combination of great talent, hard work and brilliant assets we managed to create some amazing experiences to do just that.

We started with our industry-leading products AIM and ICQ and are now just about ready to re-invent instant messaging as the world knows it to become the default product for both private and public conversations and social and status updates. We leveraged the incredible passion and talent at Bebo, launching numerous innovations and expanding into 7 new countries while maintaining our leadership in user engagement and innovative monetization. And finally, we assembled a small, yet powerful group of entrepreneurs, to build a platform for socializing the web in record time, receiving rave reviews from publishers and partners working with the Socialthing team. I can’t wait for the world to get a glimpse of our new client this summer combined with the evolution of Socialthing as it finally creates a way for conversations and social interactions to happen anywhere on the web.

You should all feel proud of your role in our success.

I wanted to say thank you for everything I’ve learned from you this past year. I loved the fact that we challenged each other every day, from our offsites and product summits to our Thinktanks and day-to-day meetings. In the end we came up with phenomenal products that will make a lasting impact–and we are just on the verge of revealing these plans. I feel so privileged to have had the opportunity to think with all of you, to break down the barriers of the old ways, to innovate again and to re-invigorate this company. I believe in you and I am so very proud of you all. Don’t let the constant swirl of changes around you take you off course. Feel confident about the decisions we have made and the path we are on. Stay focused on delivering the products you believe in and I know you will win.

I leave you in capable hands with Tim and I know he will continue to support you. I remain, as always your friend.

Joanna

AOL–which recently has been putting its Socialthing lifestreaming service on a large number of AOL-run Web sites, moving it beyond its Bebo social network–will announce this morning that it will also be launched on another Time Warner (TWX) property.

According to a press release, Socialthing will also now be part of the Web sites of the Warner Bros. Television Group, including CWTV.com, TheWB.com, KidsWB.com, DCHeroZone.com, Essence.com and Momlogic.com.

But, more significantly, sources said, AOL’s People Networks has new versions of its AIM and ICQ messengering clients ready that it is preparing to launch soon with new, more robust and socialized features.

While it is not clear when that launch will take place, sources said it is aimed at keeping the popular communications tools–AIM has about 45 million active users–competitive with highly social tools offered by Twitter and Facebook.

Socialthing is a key part of that spreading of social elements wherever a user is, such as a Web site, allowing real-time activity to be communicated directly from the site.

AOL, in its press release, said: “Socialthing will make it easy to sign-on, allowing users to login to sites using their AOL or AIM credentials, without having to create a new account. In the future, users will also be able to log into Socialthing using their Facebook, Gmail, Yahoo! or OpenID credentials. Users can publish their online activities in a real-time feed that is distributed to their friends for the immediate sharing of experiences.

Here’s the official press release on the latest launch of Socialthing:

WARNER BROS. TELEVISION GROUP AND AOL COME TOGETHER ON SOCIALTHING

Warner Bros. Television Group to Implement Advanced Suite of Social Networking Services Across Digital Destinations Such as CWTV.com, TheWB.com, KidsWB.com, DCHeroZone.com, Essence.com and Momlogic.com

NEW YORK and BURBANK, Calif. (May 05, 2009)–AOL today announced that Warner Bros. Television Group (WBTVG) will launch Socialthing™, a new online platform for socializing websites across WBTVG’s digital destination businesses, such as CWTV.com , TheWB.com , KidsWB.com , DCHeroZone.com , Essence.com and Momlogic.com . Socialthing leverages the power of AIM’s social graph coupled with advanced community tools to enable social networking publishers to attract new users and keep them engaged on their site. The announcement was made today by Joanna Shields, President of AOL People Networks, and Craig Hunegs, Executive Vice President, Business Management, Warner Bros. Television Group.

“AOL is enabling leading media brands such as Warner Bros. Television Group to tap into the power of the social graph by combining the strength and global reach of our messaging networks with our powerful social networking tools,” said Shields. “With Socialthing, fans can converse and connect around hit TV shows such as ‘Gossip Girl’ and broadcast their passion and opinions to anyone across the Internet.”

“Warner Bros. is excited to be working with Joanna and her team,” added Hunegs. “Socialthing, combined with the stories and programs on our sites, will create a powerful and engaging combination of content, community and conversation for our users.”

The Socialthing pact will offer WBTVG and its digital entertainment destinations immediate access to AOL’s global messaging network of 57 million* monthly AIM and ICQ users. WBTVG will embed the Socialthing platform–free to users and requiring no installation or download–on its family of sites, creating a social experience that makes it easy for users to share content, connect with one another, and explore common passions in a number of ways:

Socialthing will make it easy to sign-on, allowing users to login to sites using their AOL or AIM credentials, without having to create a new account. In the future, users will also be able to log into Socialthing using their Facebook, Gmail, Yahoo! or OpenID credentials.

Users can publish their online activities in a real-time feed that is distributed to their friends for the immediate sharing of experiences. WBTVG will use this feed to create online identities for characters from its popular TV shows, such as Serena van der Woodsen or Blair Waldorf from “Gossip Girl,” enabling fans to follow not only their friends’ lives, but also their favorite characters’ lives online. WBTVG will also post breaking news into the feed, delivering the latest information instantly to fans and spurring further discussion.

Built-in communications tools will enable users to connect with buddies and other fans through AIM within the environment of the WBTVG site they have come to visit, allowing them to remain at their target destination without having to leave the site experience for another domain. Socialthing users can meet up with fans in chatrooms using the embedded AIM chat client, or speak directly to buddies via the built-in Instant Messenger. Users can connect and converse with all of their friends and other fans, and broadcast these activities to anyone on the web, if they choose, via the real-time feed.

Socialthing also makes it easy for users to share video, photos, articles and comments with their friend networks, starting with the AIM network and in the future adding other top networks including Facebook, Twitter and MySpace. Whether it’s a hot new shot from “Gossip Girl” at CWTV.com, a new episode of “Rockville CA” at TheWB.com, fashion and beauty advice from Essence.com, the “Conception Diaries” video series at Momlogic.com, or a new superhero game from KidsWB.com or DCHeroZone.com, Socialthing easily turns content into conversation and will allow users to deliver video and images to friends.

AOL and WBTVG will support the Socialthing launch with cross-promotion and anticipate launching the application on CWTV.com, on WBTVG’s digital entertainment destinations, and on AOL properties. The campaign will raise consumer visibility for the application and drive fans to the destinations for exclusive opportunities they can’t find anywhere else. More details will be forthcoming in the coming weeks.

While Socialthing delivers users a high degree of interactivity and visibility, users remain in full control of their publishing activity. They may choose to “always share activity,” “never share it” or “always be asked before sharing,” and can select which privacy option best suits their individual needs.

A site has been created at http://socialthing.com/forwebsites allowing publishers, interested in enabling Socialthing on their sites, to gain further information and insight into the platform.

The Touch resembles the iPhone, only thinner, with the same multitouch screen, fast Web browser, iPod media player and ability to run almost all of the 35,000 apps in Apple’s App Store. It doesn’t have a camera, or a few other iPhone features, and it can’t connect to cellphone networks, relying instead on Wi-Fi for its Internet connection.

The Touch has caught on: Apple recently indicated that it has sold 16 million of them. One reason for the popularity is that its freedom from a phone company eliminates pricey monthly bills. But the Touch can’t easily make voice calls right out of the box. So this week, I tested ways to make the Touch even more like the iPhone: apps that use the Internet to make phone calls.

Three Apps to Test

I successfully tested three apps that can be downloaded free of charge from Apple’s App store — Skype, Fring and Truphone. Skype gave me the best connection, and my friends wouldn’t have known I was using it unless I told them. (Skype’s app is popular, with 2.8 million downloads in just four weeks.) Fring and Truphone let users make calls using Skype’s service within their apps, and they also run other programs like AIM and MSN Messenger. But Fring’s phone calls didn’t sound as clear, and I had technical difficulties with Truphone.

The downside to using these apps on an iPod Touch is that you must be connected to a Wi-Fi network. For a lot of people who work and live in areas surrounded by wireless networks, this won’t be a problem most of the time. But in those moments when mobility comes into play — like driving in a car — you’ll miss having a steady line through a phone carrier. You also can’t use these apps to make 911 emergency calls.

Another negative is that third-party applications can’t run in the background on the iPhone and iPod Touch. This means you can’t use a Touch for browsing the Web or reading email while waiting for a call from a friend via Skype or Fring. Fring offers an option that emails you when friends call or message, so you can sign on and call them back. Truphone has built-in voicemail. Skype doesn’t currently offer a notification feature.

(The next version of the iPhone OS is supposed to include notifications, which could improve the usability of these apps.)

The Touch comes in three models: an eight-gigabyte version for $229; a 16-gigabyte for $299; and a 32-gigabyte for $399. Because the Touch doesn’t have a built-in microphone, you must use something like the iPhone Stereo Headset, which costs $29 and has a microphone in its cord.

Skype Plans

Free Skype accounts, which can be used for making calls with all three apps, take just a few minutes to set up. And calls from one Skype user to another are free. Skype calls to landlines or cellphones are relatively cheap. Skype Credit, a pay-as-you-go plan, charges 2.1 cents a minute in the U.S.; Skype Subscription is a flat monthly fee that costs $2.95 when used for calls made to and from the U.S. A monthly fee of $5.95 gets you unlimited calling to one country, and $12.95 a month pays for unlimited calls to 42 countries.

The Skype, Fring, and Truphone apps let you easily import contact names and numbers from your iPod Touch. They also enable instant messaging between you and your friends. Delightful sounds indicate incoming messages and calls, and these can be heard even when the headset isn’t plugged in — as long as you put the Touch down without closing the app.

I had the most success with the Skype app. My Skype-to-landline calls sounded perfect to my boss on the other end. Skype-to-cell and Skype-to-Skype calls sounded good, but weren’t always as clear; I used my Skype account to call a friend in New Orleans on her Skype account, and I heard echoing a couple times during our 30-minute chat. Skype says this could be attributed to the fact she was on a laptop.

Fring calls made using Skype — to landlines, cellphones, and other Skype contacts — weren’t as good as the Skype app. Friends’ voices sounded slightly shaky and muffled. This kind of thing isn’t the end of the world in a quick chat, but could be a real burden during an important call. Fring offers a long list of add-ons, letting you sign in to various accounts all within the same app. These include Skype, MSN Messenger, ICQ, Google (GOOG) Talk, Twitter, Yahoo (YHOO), and AIM.

Technical Difficulties

Truphone calls to landlines and cellphones sounded a bit fuzzy. Truphone is a service unto itself, like Skype, with free calls between Truphone users, pay-as-you-go plans and monthly plans. Like Fring, Truphone enables use of other programs within its app, like AIM and Yahoo Messenger. And it includes free voicemail. But the app didn’t always work for me.

A feature in all three apps lets you call an automated voice test line so you can hear how you sound before calling others.

These iPod Touch apps aren’t perfect, and the next version of the iPhone OS may let them can run more productively in the background. But making calls from the iPod Touch is a pretty cool experience when it works well, and free or low-price plans are an attractive alternative to cellphone carriers.

Edited By Walter S. Mossberg

• Email us at mossbergsolution@wsj.com. Find this and other columns and videos online free at the All Things Digital Web site: http://solution.allthingsd.com

]]> http://allthingsd.com/20090428/ipod-to-reach-out-and-touch-someone/feed/ 0 http://allthingsd.com/20090316/how-to-juice-aol-a-spin-out-of-course-but-also-a-reunion-at-dulles-hq/ http://allthingsd.com/20090316/how-to-juice-aol-a-spin-out-of-course-but-also-a-reunion-at-dulles-hq/#comments Tue, 17 Mar 2009 01:32:45 +0000 Kara Swisher http://kara.allthingsd.com/?p=10997

As soon as he got his new job last week, new AOL Chairman and CEO Tim Armstrong sent out a rather hopeful email to the troops–his first communication as the latest leader of the ragtag online service.

“I’m really looking forward to seeing you and would love to hear your thoughts and suggestions,” wrote the former Google (GOOG) exec Friday (who alarmingly kind of resembles this Elvis image), “on how to make AOL and its sister properties the most powerful brands on the Internet.”

Well, one can hope!

To goose that dream, although he still does not officially start in the job until April 7, Armstrong is also addressing all the troops tomorrow at 11 am EST and has chosen to do so from, of all places, AOL’s old center of power in Dulles, Virginia.

AOL staffers I spoke to also hope most of all that Armstrong will quickly and transparently lay out plans for a spin-out of the Time Warner (TWX) online unit from the media conglomerate, where it has languished for years.

“Armstrong would not have taken the job if the plans for a spin out of AOL were not in place and it’s in everyone’s interests to signal that it’s a go right away,” said one source close to the situation. “The only catch is the poor economy, but even that should not prevent Time Warner from doing what’s right to finally fix AOL.”

And sources said Armstrong could further up the ante tomorrow and help raise the layoff-weary morale by having some former AOL execs from its glory days as the top online player in person at the event.

Several sources said one exec most likely to make an appearance is Ted Leonsis (pictured here), one of AOL’s most colorful top early execs and a longtime inspirational figure within its ranks.

Unlike most AOL execs from those days, many of whom were eventually run out on a rail, Leonsis also stayed on through its disastrous merger with Time Warner and beyond.

But, like all of the Dulles complex–which was once the bustling worldwide HQ for AOL–Leonsis finally left the company, after a falling out with the management regime that Armstrong just hipchecked out of power. He is now AOL’s vice chairman emeritus.

Both CEO Randy Falco and President Ron Grant moved AOL’s locus largely to New York, and minimized the staff and influence at Dulles, where most of AOL’s products have been made since its origins in the early 1990s.

“It’s a smart move to go to [the Dulles staff] directly first…the last regime pretty much shut them out…and that created bitterness, when we need to be unified,” wrote one AOL insider to me in an email.

(Sidenote: As the AOL beat reporter at the Washington Post back then, I actually went with then-PR head Jean Case to look over what became the Dulles facility, to see if it would be a good place to expand to; previously, AOL was located in nearby Vienna, behind a car dealership.)

A Leonsis visit at AOL will be like old home week, although some are hoping too that former AOL CEO Steve Case could also make an appearance. He and Leonsis still make online investments together.

But that might still be deeply controversial within Time Warner, where Case and also former Time Warner CEO Jerry Levin are widely blamed for situation that the company found itself in when the Web 1.0 bubble burst and AOL’s once vaunted valuation collapsed.

Although Case and Time Warner CEO Jeff Bewkes have since moved on, bygones have not been bygones within Time Warner.

And, while it is often denied by top execs, AOL has suffered because of ill-hidden grudges, which have partly prevented it from being revived, even as other Internet giants have been born in the interim.

Ironically, many of the current crop of shooting stars owe a lot to the pioneering and innovative AOL products, including: its AIM and ICQ instant messaging services, which echo an early version of Twitter; the “Buddy List,” which was all about friending; and its deep social networking roots, with chat rooms and profiles that were the Facebook of its day.

The question for Armstrong is: Can AOL go home again?

]]> http://allthingsd.com/20090316/how-to-juice-aol-a-spin-out-of-course-but-also-a-reunion-at-dulles-hq/feed/ 4 http://allthingsd.com/20090226/aol-ad-head-greg-coleman-reorgs-too-its-spreading-like-the-flu-at-web-firms-today/ http://allthingsd.com/20090226/aol-ad-head-greg-coleman-reorgs-too-its-spreading-like-the-flu-at-web-firms-today/#comments Fri, 27 Feb 2009 00:58:01 +0000 Kara Swisher http://kara.allthingsd.com/?p=10475

Another Web company, another management restructuring!

Yahoo (YHOO) reorg fever struck AOL today too, as its advertising head, Greg Coleman (pictured here), moved the exec chairs around his domain at AOL’s Platform-A unit.

Coleman–who actually once was Yahoo’s sales head before taking the new gig at the Time Warner (TWX) online unit earlier this month–is replacing some execs and elevating others. Also there is some sleepy ad-serving stuff about the migration to its ADTECH system.

In related news earlier today, BoomTown reported that AOL International head Maneesh Dhir was leaving.

You must all know the drill by now, after endless reorg memos today, so here’s the entire skinny in the memo Coleman sent out (also, after the jump, is the 2009 goals memo sent today by AOL CEO Randy Falco that says, let’s be honest, next to nothing):

From: Coleman, Greg
Sent: Thu 2/26/2009 7:00 PM
To: Platform-A@platform-a.com
Subject: Unlocking Our Potential

Dear Platform-A colleagues,

When I met with you earlier this month, we talked about the big mission we’re embarking on and the vision I have for our future.

Over the past year, you’ve done great work integrating Platform-A and creating a powerful business from the ground up. Platform-A now provides marketers the most comprehensive and cost-efficient tools and technologies for the digital advertising space.

Just today, we took another big step forward with the migration of our ad inventory to ADTECH–an incredible challenge and a big win for us and our advertising partners. My thanks go out to the technologies and ADTECH teams who made this happen.

I’ve also been inspired by what I’ve heard from people throughout the organization, many of whom reached out to me during my first few weeks here to express their confidence in our ability to succeed.

Now, after a year of transition, key acquisitions and integration, we need to turn our attention to unlocking the full potential of this great business. And we need to move aggressively.

This will mean changes in how we’re organized, particularly in our ad sales functions. Over the next few weeks, I will be rolling out a multi-tiered plan that will address our infrastructure, make necessary role changes and bring in talent where needed. I want to tell you about some initial steps we’re taking today.

First, Don Kennedy will be stepping down as head of ad sales, a role I will assume on an interim basis. Don and I agreed that his many talents are best served in a different capacity, and I look forward to working with him in the coming weeks to define that role.

In addition, Mike Peralta will be leaving Platform-A. I want to thank Mike for his contributions to the business, and wish him well on his future endeavors. His team will report temporarily to Mark Ellis.

In addition to his day-to-day responsibilities, Mark will also be working closely with me as an advisor as we work through the changes ahead. Mark is a veteran in the Internet advertising space, and in the short time I’ve been here, I’ve quickly come to value Mark’s insights into the market and Platform-A. I’ve asked Don to lend his keen insights as an advisor during this process as well.

We will also be holding two days of meetings next Tuesday and Wednesday with regional ad sales executives to discuss the plan and get their input.

As we think about our growth and our future, please know that our mandate is clear. Even in this economy, we must ensure we have the best sales teams and the best tools across the country to serve our clients and grow our share of the market.

I came to Platform-A because I know this business has an incredibly bright future. And I know that working together, and working closely with our colleagues in MediaGlow and People Networks, we will realize that future.

Greg

AOL’s 2009 Goals

Dear AOL colleague,

This year marks the third of our three-year turnaround plan for AOL. Over the past two years, we’ve transformed the company and focused on three key growth businesses–MediaGlow, Platform-A and People Networks–positioning AOL to succeed over the long term.

Last year, we saw progress in each of these businesses. MediaGlow experienced sustained and healthy increases in users and engagement, proving we can grow our Web audience by creating experiences that appeal to people’s passions. Our People Networks unit embarked on a series of innovations and integrations that will set our social media experiences apart from the competition. On the advertising front, we integrated our acquisitions and made progress in other areas, although we continue to face challenges in premium display ad sales, which we are aggressively addressing.

If 2008 was about aligning our company against our core businesses, this year is about executing on our goals in what’s sure to continue to be a difficult market.

To succeed, we’ll need to continue operating as efficiently as possible, taking advantage of every available opportunity and remaining focused in a noisy marketplace. Our 2009 goals are designed to provide that focus. The goals may look familiar to you, which is a testament to the fact that our strategy over the past two years is the right one. As before, each of these goals will have specific metrics attached to them, which your business leaders and managers will be communicating in the near future.

Publishing. Over the past 18 months, we’ve reinvented our approach to programming, and as a result we’re successfully and efficiently reaching a younger and more valuable audience. This year, our new MediaGlow business unit will build on this momentum, launching 30 new edited niche sites and thousands of automatically programmed sites, creating original programming in our Los Angeles and New York studios and growing our audience worldwide, while continuing to enhance our ability to monetize our programming.

Advertising. Platform-A today offers advertisers easy access to the largest reach and the most sophisticated set of advertising tools available online, thanks to the integration last year of our seven advertising acquisitions. This year, we will build on Platform-A’s unmatched strengths to help marketers fully harness digital media to build brands and enhance online performance, worldwide.

Social Media. People Networks’ mission is to connect people with everyone and everything they care about. Last year, the group focused on integrating Bebo, AIM, ICQ, Goowy, Yedda, SocialThing!, Userplane and our other community properties, which combined reach more than 90 million worldwide. This year it will launch a series of innovations that leverage the strengths of this integration, starting this month with breakthrough updates to Bebo, and proceeding to a program to socialize the Web, updates to AIM and much more. In 2009, People Networks will create the most engaging and useful social media services available with the goal of making it simple for consumers to live their lives online.

Products & Technologies. In 2008, the Platforms team grew the Search business worldwide by more than 7% year over year and the MapQuest and Commerce & Marketplace teams showed strong profitability and feature innovation. At the same time, the global publishing and Relegence teams helped build out the systems that would become MediaGlow. The Products team focused its efforts on core products–Mail, Mobile, Desktop and Toolbars–that offered us the best opportunities for growth, while exiting dozens of underperforming ones. This year, the combined Platforms and Products teams will continue to innovate on these core products and services. The Technologies team will continue to improve our ability to launch and scale new sites and manage our data centers and network as efficiently as possible.

Access. Over the past two years, the Access team has done a remarkable job of managing this business, expanding margins, improving our ability to convert subscribers to free users and cutting costs, while maintaining the quality of the service. Access continues to be an important source of revenues and profit for the company, and this year, the team will continue to deliver in these areas.

Cost Management. Our efforts to effectively manage costs across the board have been a significant success, positioning AOL for the troubling economic times we currently face. In 2009, we will continue to look for ways to prudently manage our business and align costs with our ad-supported business. This isn’t just about cutting costs, it’s about smart resource allocation.

Living Our Values. Achieving our goals will mean nothing if we lose site of our company’s values. Living our values – integrity, collaboration, inclusiveness, outward focus, innovation – is a prerequisite to hitting our numbers. In 2009, we will continue to embody all of our company’s values and behaviors in everything we do.

You know as well as I do that this year will present us with new trials, new surprises and new opportunities. I’m confident that by working together, guided by these goals and our shared values, we’ll achieve much in 2009.

Thanks for everything you do every day to make AOL great.

Randy

]]> http://allthingsd.com/20090226/aol-ad-head-greg-coleman-reorgs-too-its-spreading-like-the-flu-at-web-firms-today/feed/ 0 http://allthingsd.com/20090223/aol-socializes-even-more-with-new-lifestream/ http://allthingsd.com/20090223/aol-socializes-even-more-with-new-lifestream/#comments Mon, 23 Feb 2009 14:00:11 +0000 Kara Swisher http://kara.allthingsd.com/?p=10152

As part of its ongoing rejiggering of its social-networking offerings, AOL is formally rolling out its expected Lifestream platform today, with a new “timeline” depicting a user’s online life in a streaming horizontal calendar called a Lifestory.

(See image above; click on it to make it larger.)

The moves are the latest made by AOL’s People Networks related to its Bebo social site, which this column previously reported about in December.

AOL is hoping its efforts will focus users more on Bebo, which it bought for $850 million in March, a high price that has been controversial both inside and outside Time Warner (TWX), which owns AOL.

While Bebo is one of the larger social networks, it is still not popular in the U.S. and lags well behind leaders like Facebook.

Lifestream will first be available on AOL’s Bebo and include updates from friends on Facebook, Myspace, YouTube, Flickr, Twitter and Del.icio.us. Lifestream can also be used by brands, celebrities, bands and companies.

Lifestory uses a zooming technology to look at various times, using text, music, videos and photos, and can be done with many contributors. It also includes a feature called Social Slider that allows a user to have more granular filtering control over who sees what in Lifestory.

AOL had previously launched other social-networking features, such as Social Inbox, a one-stop destination with aggregated social feeds from across the Web, multiple email accounts and media recommendations.

AOL also has an upcoming service called Site Social, with plans to use its advertising platform to help monetize the offering.

Many large Web portals like AOL have recently rolled out by large Web players like Microsoft (MSFT) and Yahoo (YHOO). All are attempts to offer a competing product to the most popular social-networking sites, Facebook and the News Corp. (NWS) unit, MySpace, where users have flocked. (News Corp. is the owner of this Web site.)

Those two companies have also been making moves of late to allow consumers to aggregate their disparate piles of online information through connective offerings that allow them to pool all kinds of Web content and communications in one place.

AOL’s People Networks unit, which includes Bebo, AIM and ICQ, has an overall audience of 92 million, according to a recent comScore (SCOR) survey.

Here are some screenshots of the AOL pages with the new features:

Moviefone Lifestory

VH1 Lifestory

Social Inbox

User Profile

User Profile 2

]]> http://allthingsd.com/20090223/aol-socializes-even-more-with-new-lifestream/feed/ 3 http://allthingsd.com/20090128/aol-ceo-randy-falcos-entire-memo-to-the-troops-on-layoffs/ http://allthingsd.com/20090128/aol-ceo-randy-falcos-entire-memo-to-the-troops-on-layoffs/#comments Wed, 28 Jan 2009 18:37:44 +0000 Kara Swisher http://kara.allthingsd.com/?p=9068

Here is the letter AOL CEO Randy Falco (pictured here) has penned to the entire staff about layoffs of 10 percent of its workforce–or 700 people–and other cost cuts, which the online service is announcing today.

“We’re at a pivotal point in AOL’s transformation, and need to be even more strategically focused and operationally efficient as we weather the economic storm,” wrote Falco, in part, about the move.

As BoomTown reported earlier today, Time Warner (TWX) online unit AOL is making huge staff cuts, due to the weak economy and the ensuing deep falloff in advertising revenue, but also because of recent structural changes made to refocus the once-mighty service.

The layoffs will take place over the next several quarters, with most of the U.S. cuts to be completed by March. AOL has 7,000 employees world-wide, with most located domestically.

Here’s Falco’s letter:

Dear AOL colleagues,

I’m writing to tell you about some important decisions we’ve made about AOL’s business and why we’ve made them.

The deepening economic recession has affected every corner of the economy, including our own. Online marketers have tightened their ad buying across the board, reducing their spend by hundreds of millions of dollars.

As a result, we will be reviewing our entire organization to further align resources and expenses against the real revenue opportunities in this difficult market. Part of this will involve consolidating groups to gain efficiencies that will unfortunately lead to head-count reductions. We anticipate this will result in a net reduction of our workforce of up to 10% over the next several quarters–and we will attempt to finalize all domestic actions by the end of March. Reducing our workforce is never easy, particularly in the current climate, but our goal in doing this is to provide our core businesses the resources they need to thrive. Please know that, as always, we’ll be doing everything we can to help and support those affected, including offering severance packages and other services.

To further keep employment costs down, we will also forgo merit pay increases in 2009. This is a painful decision, but one that many companies have prudently taken to help minimize the number of layoffs they have to make.

To provide some perspective on these decisions, right now we’re two years into a three-year turnaround plan. Since day one, our strategy has focused on building and growing mutually dependent publishing, advertising and social media businesses to take advantage of the shifting media landscape. We’ve worked shoulder-to-shoulder to make considerable progress during this time.

We acquired best-in-class companies across the digital advertising space (AdTech, Third Screen Media, Lightningcast, buy.at, TACODA and Quigo, respectively) and integrated them with Advertising.com to build Platform-A, the largest, smartest display advertising platform in the world.

We grew our MediaGlow audience via an efficient content development model that in 2008 enabled us to launch more than 20 new sites that are generating significant page view (up 64% year over year in December), engagement (up 39% year over year) and unduplicated user (70+ million) numbers. This momentum will continue in 2009 with our goal of creating an additional 30+ editorially curated sites focused on consumer passion points.

We combined Bebo with our longtime community assets AIM and ICQ as well as newer acquisitions Goowy, Yedda and SocialThing, to build People Networks, gaining AOL a foothold in the critical social media space, with more announcements to come on the next phase of development in both the social media space and in the integration of social and publishing capabilities.

This progress continues to put AOL in a strong position to capitalize on our new business model when the recession ends.

In addition to focusing our investments, a successful turnaround plan also requires us to realign our cost structure against this three-pronged business model–making difficult decisions to cut costs in areas that aren’t critical to our growth. Splitting out the Access business improved the transparency of what’s working and what’s not, and allowed us to make better decisions about exiting businesses that weren’t performing while investing in growth areas. A successful turnaround plan also mandates we control costs, operate with healthy margins and position the company for sustainable growth. As you know, we’ve moved repeatedly to bring discretionary expenses in line to spare across-the-board job cuts.

But we’ve also had to make many hard decisions along the way. And this moment is no exception. We’re at a pivotal point in AOL’s transformation, and need to be even more strategically focused and operationally efficient as we weather the economic storm.

In addition to the head-count reductions and the 2009 merit pay decision, we are also making changes throughout the organization to improve efficiency and better align it to our three core businesses. This includes a review of our international operations and our global shared-services functions. In addition, we will continue throughout the year to carefully and thoroughly review all our products and services to make sure every one fully supports our strategy and has the potential for growth.

Finally, we are going to realize significant savings by continuing to consolidate our facilities–for example, moving from two buildings to one in Mountain View, from two floors to one in Los Angeles, and leasing unused space on our Dulles campus.

With these and other changes, we will take significant annual run-rate costs out of our business while, importantly, retaining the flexibility to invest in our growth strategy.

I know all this will raise questions, but I wanted to share as much as I could with you now. Senior management will provide more details as appropriate to their teams in the weeks ahead.

As difficult as things look right now, the economy eventually will turn around. Some companies will use this time prudently and make difficult decisions to come out of it in better shape–growing toward areas of opportunity, scaling back in others and maintaining a line on costs all around. Our only choice is to be one of these companies. With your continued hard work and dedication, we will position ourselves to emerge a stronger company ready to lead in a vibrant online market.

Randy

]]> http://allthingsd.com/20090128/aol-ceo-randy-falcos-entire-memo-to-the-troops-on-layoffs/feed/ 2 http://allthingsd.com/20090128/buyers-remorse-or-not-aol-is-not-considering-selling-bebo/ http://allthingsd.com/20090128/buyers-remorse-or-not-aol-is-not-considering-selling-bebo/#comments Wed, 28 Jan 2009 13:30:52 +0000 Kara Swisher http://kara.allthingsd.com/?p=9040

Yesterday, TechCrunch’s U.K. blogger Mike Butcher spun the tale of buyer’s remorse run amok with a report that Time Warner online unit AOL was “seriously considering selling Bebo, the social network it acquired for $850 million only a year ago,” citing poor performance and a bad advertising market.

Later, AOL went on the record saying “there is no truth to this rumor,” although Butcher–in a third update to his piece–insisted otherwise from his sources.

In my favorite hedge ever, Butcher noted: “I’m not saying Bebo is formally on the block, but I am saying that a sale is something under consideration.”

Well, actually, no.

What is true, which Butcher did do an excellent job outlining, is that AOL most certainly overestimated the prospects for Bebo as an advertising and growth vehicle, hoping that Bebo’s interesting new media offerings–like its “KateModern” online series–combined with a social network, were the magic bullet.

It did not hurt that Bebo was then being sold to advertisers by its very deft top exec Joanna Shields, who is now head of AOL’s People Networks.

Thus, AOL woefully overpaid for it, especially if you look back from the current dire economic environment and also now realize that social-networking advertising is a little bit harder to get going than promised (a shock, I know).

No inside sources you talk to at AOL or Time Warner (TWX) will deny any of this today, and Time Warner CEO Jeff Bewkes has even said so publicly.

This was not exactly a secret then either. As I wrote right after the sale last March:

What’s AOL getting for its $850 million in cash to purchase social-networking site, Bebo?

A very attractive social-networking service and a very experienced exec who has been running it.

But, perhaps more importantly for those who focus on pesky numbers, not a whole lot of revenue and negligible profits, judging financial information I got a gander at, courtesy of sources at several companies that looked at funding or buying Bebo.

And the rest of the overall outlook for Bebo? A small but growing business, with nice user engagement with strong page views and minutes spent per session, but little traction beyond Britain and Ireland, and too small a presence in the critical U.S. market.

(Bebo is also strong in New Zealand, but BoomTown does not have to point out that that country is not exactly the kind of game-changer that AOL CEO Randy Falco mentioned in his email to the troops about the purchase.)”

And in another post I did at the time:

Thus, I am still trying to figure out why AOL–which was built on the pillars of community, communications and connectivity–has consistently not been able to leverage its still-valuable assets.

I suppose it is sexier to do a big, splashy deal, of course, which takes focus away–for a while at least–of the essential need to take hits, while doing the slow block-and-tackle work it will require to really build a strong ad and social network.

Buying Bebo, the third-ranked social network, for so much and trying to turbocharge it is a very lofty goal, of course, but the real problem with the acquisition is that it feels like an answer in search of a question.

While Bebo President Joanna Shields–who will enter the AOL exec team as part of the deal–and the Birches have clearly built a very interesting property, the weight of Falco’s calling it a “game-changer” on which AOL’s future rides could turn out to be much too much for Bebo to carry.

That is, especially with that heavy bag of Time Warner cash it is also shouldering.”

That’s why it takes about two seconds these days to uncover much residual anger within both AOL and Time Warner about the huge slug of cash that the company handed over to get Bebo, which mostly went to its quirky founders (who, many sources told BoomTown, thought they were underpaid!).

But, even so, that does not mean Time Warner is going to pull yet another stupid Internet trick–remember this was the company that sold itself to AOL for a song back in 2000, in what is now considered one of the worst merger deals ever–and sell Bebo for bupkis.

In fact, spending even more effort, it has been trying to use Bebo as the main vehicle to renovate all its communications assets, including its unsung AIM and ICQ instant messaging properties.

The center of the People Networks, run by Shields, Bebo is the third leg of the “new” AOL, as it has been recently touted, with its Platform-A ad unit and new niche content studio called MediaGlow as the other parts of the stool.

Will it all work? Will Time Warner change its mind? Will Shields give up? Will even the AOL brand continue?

“Who knows?” is the right answer, of course. With Facebook, MySpace, Yahoo (YHOO), Microsoft (MSFT) and Google (GOOG), as well as Twitter and FriendFeed, all vying to be the consumer’s dashboard to the Web, no one actually does.

And, if Time Warner is truly interested in selling off AOL whole, as it has been trying to do mightily, you might wonder if it would suddenly change course and dismember it now, causing even more confusion, when it is already facing so many other more pressing complications–all for a lousy price in the current weak economic landscape?

I called it “insane” when AOL bought Bebo for so much last year. I’d be dubious if it would get crazier still.

But if you want to see Shields in action–be careful, as she apparently so persuasive she could probably sell a big bailout to a Republican–take a look at this video I did a while back before the AOL acquisition:

[ See post to watch video ]

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