But Wall Street will quickly scrutinize the breakdown of CEO Tim Armstrong’s sales performance. Last quarter, the company posted a 5 percent ad bump, but investors hated the details: Much of the growth was coming from the company’s low-margin network business, in addition to gains from its HuffPo and TechCrunch acquisitions.

What Wall Street really wants to see (or at least what it wanted to see last quarter) is organic growth in the company’s core display business, and improving earnings.

Overall, AOL’s ad sales are up 8 percent, and display is 15 percent. Investors might raise an eyebrow over the fact that domestic display growth of 14 percent is a sequential decline from last quarter’s 16 percent rise, though. And bear in mind that these numbers include both TechCrunch and Huffington Post boosts. Also worrisome — a mere 1 percent increase in the company’s owned and operated properties — again, that’s after accounting for those two big acquisitions. (Click image to enlarge.)

Another flag for AOL: Even though it has added TechCrunch and the Huffington Post over the last year, traffic to AOL’s own sites has barely budged: A year ago, AOL attracted 106 million monthly unique visitors to its sites; this year, the total only moved up to 107 million.

AOL earnings call starts at 8 am ET, and beyond this morning’s release, investors will also want to hear what Armstrong is seeing in the ad market in general. Until recently, digital ads have been booming for just about everyone except for AOL and Yahoo, but recently we’ve heard about softness/slower growth making its way to the Web, too. (Though no sign of that from Google.)

And, of course, Wall Street will also want to see if Armstrong has anything to say about eternal speculation that he wants to link up with Yahoo itself.

Tonight at 1 am PT, techies who have nothing else to do — that would be me! — can click onto a brand new tech site called The Verge.

Well, kind of — it’s the result of many months of work by the gang that defected from AOL’s popular Engadget tech powerhouse, set up temporary shop under the Web site name This Is My Next and busied themselves with creating The Verge.

I have another screenshot below of the new site that will be focused on news, reviews and features about tech, and which has been getting a final tweaking all today.

From my quick perusal, it has a vibrant and slick design, with a lot of packed boxes, swooshy movement and plenty of content.

Along with the launch, The Verge’s parent company — formerly doing business as SB Nation, focused on sports — will also transform into Vox Media.

In a chit-chat with Vox’s CEO Jim Bankoff, top exec Marty Moe and Josh Topolsky, The Verge’s Editor-in-Chief, the trio of former AOLers all said they were going to for the big time.

“We want to build the platform for talented native Web voices, in sports and tech for now, and then we plan to grow more verticals,” said Bankoff.

“We want to create more than a news site or blog about tech — the frustration at AOL was that we did not get the resources or manpower to realize that bigger vision,” said Topolsky.

(You’re speaking to the choir, brother!)

Said Moe: “We think this category has not had a large enough vision…not enough has been innovated over the years and we think it is a big opportunity.”

Topolsky said the site, along with a mass of original content from 30 writers, will also be helped by a strong database of information about all its topics and gadgets and also focus a lot on community input.

“What we want to do was graduate beyond the blog,” he said.

(Hmm…and here I just got the hang of this blog thing.)

Bankoff, who would not say how much Vox spent on launching The Verge — my back-of-the-envelope guess, several million dollars — said that costs were spread out between the tech and sports sites with centralized sales and product teams.

Initial launch sponsors are BMW, Sony and Samsung, said Moe, who is aiming to sell “major brand advertisers on the idea that we will be the premiere destination of consumer tech coverage.”

It has to grow past big sites like Engadget to do so, but Topolsky said that This Is My Next had three million unique visitors in the last month and more than 10 million page views.

“We have done that with a lot of editorials and in-depth reviews,” he said. “I think people are really hungry for great content and stories.”

As to competitors, Topolsky said that “this not to necessarily I win if you lose,” although his clear aim is to unseat sites like CBS-owned CNET, Engadget and Gawker Media’s Gizmodo and perhaps even newsier sites such as TechCrunch and AllThingsD (as if!).

“We are going to do the nuts and bolts stuff,” he said. “Somewhere between Engadget and Wired.”

Topolsky compared The Verge to a “boutique hotel — we have the same stuff everyone else has, but it is a much more elegant experience.”

Later, that will change, he promised, noting that “this is only version 1.0.”

Of course — but what else would you expect from a gadget site?

(Good luck and congrats to the entire The Verge team from AllThingsD!)

And here is another lovely screenshot, as promised:

Me and my new man crush Paul Carr both went on CNN’s weekly media show “Reliable Sources” yesterday in separate interviews with its host Howard Kurtz.

It’s a pretty good summation of the two sides of the argument about what’s been going on with the popular TechCrunch news site. (That is, until the next mantrum by one of its staffers.)

Actually, I truly hope the site, which has some very fine journalists, will add some more talent (they’re looking!) and get back to business.

Covering the tech business, I mean, and so will I.

Enjoy:

The blogger, who is leaving AOL and TechCrunch over a fight over his new venture capital fund, said in an interview that he plans to start a personal blog in the coming days.

Arrington, whose last day at AOL is Thursday, said he’ll be writing about what interests him — start-ups and journalism — and that he won’t be hiring other staffers.

Read the rest of this post on the original site »

Arrington said “There’s a little drama around TechCrunch right now and me, but the focus is on the content and in particular the companies launching.” He added, “It’s a sad day for me, because I built this.”

Arrington said he’d continue to run the CrunchFund, where AOL will remain an investor. But he’ll try to avoid conflicts of interest for the next few days, he said.

AOL and TechCrunch founder and editor Michael Arrington have officially parted ways, almost exactly one year from the New York Internet portal’s acquisition of the popular tech news site.

He was replaced by longtime TechCrunch editor Erick Schonfeld.

The company’s statement said that the high-profile blogger had “decided” to move on, which was a decided understatement, given that the negotiations between the pair sometimes approximated a cage match.

The noisy media fight centered on a new $20 million venture fund that Arrington is now running, called CrunchFund, and his editorial status at TechCrunch with the new role.

Many, including myself, had raised questions about the conflicts of interest inherent in the situation, if Arrington had remained influential at TechCrunch. Arrington had argued that transparency took care of that.

The name of the fund, which is close to the name of TechCrunch, will remain, said Arrington onstage this morning at the TechCrunch Disrupt conference in San Francisco.

“This is my baby and I built this,” he said, in an understated appearance. “So, it’s a sad day.”

Before beginning an opening interview with well-known Silicon Valley investor and venture capitalist Reid Hoffman at the conference, Arrington got off a good joke — one of many to come, apparently (uh-oh!) — by wearing a t-shirt with the label: Unpaid Blogger.

It was a humorous poke at AOL content czar and former Arrington boss, Arianna Huffington, who had called him that in one of the many rounds of fighting of late.

It was all in good fun, finally, after not so much fun.

Along with a media firestorm, the fracas included Arrington posting an angry blog on TechCrunch itself demanding that AOL give him editorial independence or sell him back TechCrunch.

AOL CEO Tim Armstrong and Huffington were inclined to do neither and, thus, Arrington had to go.

Here’s a statement that was just put out by AOL:

“The TechCrunch acquisition has been a success for AOL and for our shareholders, and we are very excited about its future. Michael Arrington, the founder of TechCrunch has decided to move on from TechCrunch and AOL to his newly formed venture fund. Michael is a world-class entrepreneur and we look forward to supporting his new endeavor through our investment in his venture fund. Erick Schonfeld has been named the editor of TechCrunch. TechCrunch will be expanding its editorial leadership in the coming months.”

Oddly, Armstrong put the news of the change at the end of his weekly internal memo to staff, in which he noted that the company would continue as an investor in Arrington’s CrunchFund — a $10 million investment — which had started this whole controversy.

Tim, in old-timey journalism that’s called burying the lede, but here it is:

AOLers –

We’re right in the middle of the most important season of our year and we have some critical work to get done. I wanted to share the highlights of what we are expecting to have happen in the next 12 weeks. As I mentioned last week, we have prioritized our focus areas in a concise document.

The main items are below and there will be a steady set of reviews against these and related items at the weekly product reviews and monthly business reviews:

1. Traffic Growth: Full execution of the Bridge and Tunnel Project

2. Display Ads Growth: Premium formats and video growth/improvement in the quote to collect process for customers and sales

3. Video Platform: Launch of new video platform

4. Patch Monetization: Sales allocations/partnerships

5. Expansion of Content Verticals/Platform: Genre verticals in HuffPost/video expansion

6. Mobile: Content & ads priority match/move mobile engineering up the brand food chain

7. Expansion of Devil Network: Increase partners and scale production

8. Paid Services: Increase commerce partnerships

As we have discussed, the fall of ’11 will be about driving organic product improvement and reducing our focus to the high leverage opportunities. Every new opportunity at the company will be compared to our succinct plan. If we are going to add a new idea, an existing idea needs to be removed. There is room for execution and for improvement — everything else needs to be put on the back burner.

Finally, I’d like to announce that Michael Arrington, the founder of TechCrunch, has decided to move on from TechCrunch and AOL to his newly formed venture fund. TechCrunch continues to be a part of the AOL Huffington Post Media Group. AOL will maintain its initial investment in Michael Arrington’s fund and AOL Ventures will oversee our investment in the fund.

Have a great week everyone — stay focused and keep up the strong momentum –TA

Indeed, now that the disruption is over, it is long past time to focus on the entrepreneurs and start-ups that TechCrunch is built on. Here is the link to watch the live stream of TechCrunch Disrupt.

UPDATE: It’s not over until it is over, apparently. In a blog post of her own, Huffington took aim at The Wall Street Journal over its coverage of the internal battle at AOL.

Calling out a Journal story from over this past weekend as “shoddy,” she took issue with its characterization of AOL as having a “culture of clashing fiefs and personalities,” with a focus on fighting between her and Arrington.

The issue at hand wasn’t about personalities. It was about principle; a very simple fundamental principle about conflicts of interest that every journalistic enterprise adheres to — including the Wall Street Journal, as its former publisher L. Gordon Crovitz points out today. But you wouldn’t know that from the breathless opening grafs of the exceptionally misinformed, substance-lite, and anonymous-quote-riddled piece.

Indeed, it takes a full eight paragraphs before the Journal’s reporters Jessica Vascellaro and Emily Steel move away from their gossip girl caricature “clash of personalities” narrative and get to — or at least near — the heart of the matter: Can someone running a venture fund edit a site covering the tech startup scene? This has nothing to do with personalities, either Mike Arrington’s or mine.

If only we could only find a way to also include the doofus-is-not-disparaging fired Yahoo CEO, Carol Bartz, this giant rumble would certainly be complete.

SECOND UPDATE: But, wait, what tweet through yonder smartphone breaks?

It is the Arrington, now seemingly taking a shot at Huffington about their clash of personalities.

Wrote Arrington on Twitter just now: “ok @ariannahuff. Let’s go ahead and talk about how this really played out.”

Oh, let’s — although part of me (and I know this might seem ironic) wants to make it stop.

With the continuing negotiations between AOL and high-profile TechCrunch founder Michael Arrington likely to come to some conclusion soon, the big question remaining is whether he will appear at its flagship conference, TechCrunch Disrupt, which officially begins tomorrow.

Sources said that seems more likely than not, although the talks between AOL and Arrington are not resolved as yet and his appearance at the highly lucrative conference is part of a whole package.

But it seems unlikely that neither Arrington nor AOL CEO Tim Armstrong and content chief Arianna Huffington wants to damage TechCrunch Disrupt, which makes piles of moolah from sponsors and fees, attracts thousands of attendees, and where a plethora of promising start-ups compete with each other.

And, in fact, some of the slated speakers I have contacted have said that they have not been told of any changes in the program.

A hackathon of those entrepreneurs is now taking place before the main event, where well-known Silicon Valley players will be interviewed on stage by the staff of TechCrunch.

The conference is mostly run by TechCrunch exec Heather Harde, as well as the site’s leading editor Erick Schonfeld.

But, of course, TechCrunch Disrupt has starred Arrington, the larger-than-life blogger now turned venture capitalist.

That shift and how badly it was done is at the center of complex severance negotiations.

As I previously wrote, sources said the company has so far refused Arrington’s bold demand, posted on TechCrunch itself, to either give the popular tech news site “editorial independence” or sell it back to him.

As I wrote last week:

The situation between the popular tech blogger and top execs at the Internet company — which bought his site earlier this year — comes after a week of increasingly testy back and forth between them, after it was revealed that Arrington was starting his own $20 million venture fund called CrunchFund.

The move caused a media firestorm over the ethics and propriety of the move, which was followed by an ugly internal war at the company, with Arrington and TechCrunch staffers on one side and Armstrong and Huffington on the other.

(Full disclosure: Although no one cares what I think, I consider the deal appalling and wrote that it was a “giant, greedy Silicon Valley pig pile.” Now, it seems to be 56 percent piggier!)

After many confusing messages from AOL, Arrington was removed from his longtime job at TechCrunch and placed in its venture arm, after editorial objections from Huffington.

That had supposedly been the the plan until it all blew up, with reveleations about what the CrunchFund deal — which includes $10 million from AOL — meant to TechCrunch and its news gathering.

That seemed clear from a widely cited quote from CrunchFund investor and well-know Silicon Valley entrepreneur Reid Hoffman to me last week:

“TechCrunch will get some real deal flow from entrepreneurs that we would otherwise not see, because they have established a prominent position as the SV/Tech industry information feed. As many tech entrepreneurs read it — both within Silicon Valley and globally — and view the information news feed to be their target for announcing themselves to the world, CrunchFund will have access to deal flow to these diverse and early stage companies. Some of these companies will be the kind of early stage companies with billion-dollar potential that Greylock invests in.”

There you had it: No one can afford to be out of the deal flow in these competitive times, even if it means cutting corners and using a tech news site as fodder.

Arrington obviously has another view of the deal he struck with Armstrong and, sources said, wants his powerful tech news platform back. He has been talking to many Silicon Valley power players about the situation, said sources.

More to come soon from this Silicon Valley soap opera. And, hopefully, it will be a happy — well, happy-ish — ending.

(Full disclosure: AllThingsD also runs conferences that could be construed as competitive to TechCrunch Disrupt, although we both we seem to do just fine. In addition, Walt Mossberg and I are getting along like peas and carrots, although we vigorously disagree over the humongous talent of Barry Manilow.)

If drafted, I will not run; if nominated, I will not accept; if elected, I will not serve.

I think that about takes care of it on the possibility of me becoming CEO of Yahoo.

And, according to at least 223 sources of mine at Yahoo, the same goes for AOL CEO Tim Armstrong, who suddenly got mentioned in a speculative article by Bloomberg yesterday as a possible merger partner and a potential top leader of Yahoo.

Given that the affable Armstrong is in the midst of several serious crises at his own company — funny how that works.

It is actually more comical, because this story is the product of over-enthusiastic bankers essentially spinning a tale of hopes and dreams that has no basis in reality.

To add to the confusion, AOL and Yahoo now share Allen & Co. to evaluate their strategic options, adding yet another level of inbred oddness on top of the situation.

The Bloomberg story was carefully couched as Armstrong being interested in a hookup between AOL and Yahoo, but the implication was that it was a serious effort.

It certainly is true that Armstrong has talked many times about a possible link-up of AOL and Yahoo in the past, even publicly. And, well before he was CEO, the pair of companies held very serious talks about combining.

But no longer — and definitely not currently — is there anything there that approximates a serious effort.

If wishes were horses, I suppose, all stumbling Web companies would ride away together into the sunset of success.

And I love me a happy movie ending!

But the real story is a lot tougher for Armstrong, who most definitely is increasingly in need of some kind of miracle, because — despite his best efforts and some progress at turning around the perennially troubled AOL — Wall Street is growing weary of waiting for his strategies to work.

AOL stock is down 36 percent since his late 2009 debut and almost 38 percent since the beginning of 2011.

As The Wall Street Journal wrote yesterday:

“Since Tim Armstrong took over the struggling Internet company in 2009, AOL has acquired more than half a dozen companies in an effort to shake off its reputation as an Internet has-been and become an ad-supported destination for news and entertainment content on the Web. It hasn’t worked.”

In other words, it is crunch time for Armstrong.

Actually, add that onto the pile, too.

That would the controversy over how Armstrong has dealt with one of its higher profile acquisitions, the popular tech blog, TechCrunch.

The train wreck of money, journalism and ethics — as well as a fantastically dysfunctional cast of characters — is still unfolding at AOL, as the company seeks to part ways with TechCrunch’s founder and editor Michael Arrington after it revealed it was an investor in a new venture fund he would run.

After much noisy mishegas over the last week, it’s clear any outcome is still not a good one for AOL or Armstrong and that the incident has tarnished the company further.

Which brings us back to Yahoo — which is having its own “Desperate Geeks of Silicon Valley” plot line with this week’s firing of potty-mouthed CEO Carol Bartz — as a possible port in Armstrong’s storm.

It’s not, of course, because it would add a level of messy complexity and potential for more disaster that only a fee-seeking banker could love.

But — and this is the honest truth — for all the money they are being paid already, they might want to come up with some better ideas, and quickly.

But it belies a deeper problem the company is grappling with: a culture of clashing fiefs and personalities created by a rapid series of acquisitions that haven’t jelled, according to a dozen current and former employees.

Read the rest of this post on the original site »

I cannot express my delight at finally getting to appear in a CGI news video by Next Media Animation, in a segment about the CrunchFund controversy.

In it, the New York Times’ David Carr and I attack TechCrunch editor Michael Arrington with paintball guns. He is wearing a green wizard outfit.

Later, a flaming Arianna Huffington and AOL CEO Tim Armstrong make an appearance.

Yes, it is that kind of video.

Enjoy:

Here’s another interesting wrinkle to the ongoing saga of AOL, TechCrunch founder Michael Arrington and his nascent venture firm, CrunchFund.

Since the controversy erupted last week, Arrington has reached out to AOL CEO Tim Armstrong, as well as others in Silicon Valley, about buying back his popular tech news site.

Sources said Arrington needs funding to do so — irony alert! — and told them over the weekend that he planned to use his blogging bully pulpit to force AOL into giving up the site it bought for more than $25 million almost exactly a year ago.

But sources said — at this point — AOL is not inclined to sell the site, which has prompted Arrington to pen a blog post on TechCrunch, not-meant-as-a-joke-titled “Editorial Independence,” suggesting they do so.

Quelle surprise!

We’ve proposed two options to Aol.

1. Reaffirmation of the editorial independence promised at the time of acquisition. Given the current circumstances, that means autonomy from Huffington Post, unfettered editorial independence and a blanket right to editorial self determination. To put it simply, TechCrunch would stay with Aol but would be independent of the Huffington Post.

or

2. Sell TechCrunch back to the original shareholders.

Arrington used an image of the Spartans from, I think, the movie “300,” on the post. Memo to Mike: All the Spartans died in the end, however valiant. It goes without saying — this situation is not valiant and you are definitely not King Leonidas.

“It is at a stalemate, so this is the result,” said one person with knowledge of the pugnacious effort by Arrington to take back his baby.

Which, of course, he sold in the first place.

AOL has stated it will not allow Arrington to remain its editor or have “influence on coverage” while also doing a venture fund.

Thus, some of Arrington’s staffers, such as M.G. Siegler, have already been plowing the ground ahead of Arrington’s post.

Siegler, for example, penned a weepy diatribe about how unfair it all is and how different the site operates from slow-footed meanies at big media organizations such as the New York Times. The Times strafed Arrington in a David Carr column yesterday.

Wrote Siegler, in what can only be described as soap-opera fantastic: “TechCrunch is on the precipice. As soon as tomorrow, Mike may be thrown out of the company he founded. Or he may not. No one knows.”

Tune in tomorrow to see if AOL’s content chief and Arrington boss Arianna Huffington will use that gun in her pocket. Or will she use the razor-chiseled cheekbones of Armstrong to slice her new nemesis?

(Alls I can say to add to what I have already said, at this point: Good lord. But, wait, isn’t there a TechCrunch Disrupt conference next week to hawk and make it all about Arrington and not the entrepreneurs? This explains everything!)

While Siegler is trying to make it all sound as if it is so very unfair, since the site is presumably so very special, AllThingsD operates in a similar quick-edit way to TechCrunch — where I will underscore there are some terrific journalists.

But — because it is simply flat-out wrong on every possible scale — neither Walt Mossberg nor I would ever consider being editors of the site while also running a venture fund.

(In fact, it is now a standing rule at ATD that, if we ever did such an unthinkable thing — which of course we never would — our writers tell us we stink rather than praise us.)

Meanwhile, we’ll be busy breaking some actual tech news on this site, like here and here and here, while TechCrunch presumably faux-burns and AOL fiddles.

Of course I have something to say about the news yesterday that AOL would be a key investor in a new early-stage venture fund being started by TechCrunch’s perpetually petulant editor Michael Arrington — with a big, fat and decidedly greasy assist from a panoply of Silicon Valley’s most powerful VC firms and angel investors.

Arrington has previously called me “chief whiner” — oooh, buuuurn, although fair enough, since I have compared him to an egomaniac turtle named Yertle in the past — about my nagging him over the importance of upholding standards of fairness and ethics in journalism.

So as not to let him down, let me begin the whining.

First, my initial reaction when I first heard about the deal: Ugh. Sigh. Hopelessly corrupt. Now 100 percent more icky! A giant, greedy, Silicon Valley pig pile.

I was upset.

By early evening, after my kids told me to chillax, my dark mood had changed to accept that the transaction — however profoundly distasteful to me — was part and parcel of the insidious log-rolling, back-scratching ecosystem that has happened in every other center of power in the universe since the beginning of time.

And so it goes in Silicon Valley.

In fact, the creation of a $20 million investment kitty that Arrington has dubbed CrunchFund is simply the formalization of a long-standing arrangement that has already been going on since he founded his popular tech blog.

That is to say, in which the basic standards of journalism are first warped by calling it newfangled truth-telling and then endlessly corroded by using a wily and unusually aggressive combination of favors and threats to extract, from start-ups and VCs in need of press, both exclusive access and information.

And now, inevitably, money.

This could have been a lot cleaner, of course, by Arrington simply resigning from TechCrunch, becoming a VC and perhaps starting a new blog where his agenda is much clearer, from which he could huff and puff away as he does with much entertaining gusto at real and (mostly) imagined slights.

There is certainly precedent for VCs blogging, including Fred Wilson, Brad Feld and Ben Horowitz. And, despite my criticisms about ethics, it is clear that Arrington is a talented writer whose unique voice would be even stronger if it was truly seen as separate from what has become a news organization.

But because of his obvious need to be the center of attention — requiring the ermine kingmaker mantle and foisting his patented I’m-here-to-tell-it-like-it-is attitude on us all — that appears to be impossible.

(By the way, I await Arrington’s usual inane rant about the fictional conflicts of interest related to my gay Google marriage anytime now in 3 … 2 … 1, always and purposefully leaving out the pertinent facts that I can only wed one person, get no financial benefit and am also a prominent critic of the scary search behemoth, while he can make a badillion questionable and grossly tangled investments.)

Personal annoyances aside, what’s most interesting here is the group of Silicon Valley power players who lined up to bow and scrape and then hand over a small pile of dough to the blogger who would be king.

They include: Sequoia Capital, Redpoint Ventures, Kleiner Perkins, Greylock Partners, Austin Ventures and Accel Partners, as well as individual investments from partners at Benchmark Capital and Andreessen Horowitz, entrepreneur Kevin Rose and DST Global’s Yuri Milner. And, of course, the inevitable Arrington BFF Ron Conway.

Holy googa mooga, that would be, well, everyone, except Ashton Kutcher and Justin Timberlake (who will surely appear soon enough).

As one person also pointed out to me, I don’t recall this many competing VCs investing in one company, let alone another venture fund.

It goes without saying that the reasons they all decided to jump in this fetid pool with abandon are quite varied, if all entirely compromised.

One investor told me — off the record, naturally — that he thought it would be an interesting experiment to see what happened and so he wanted in, especially since everyone else was doing it.

Another well-known VC said that there is no downside to being financially affiliated, especially in attracting talent to its start-ups, with Arrington and, by extension, TechCrunch.

The well-respected Reid Hoffman of Greylock was the only one brave enough to talk on the record, explaining the reasoning pretty clearly:

“Techcrunch will get some real deal flow from entrepreneurs that we would otherwise not see, because they have established a prominent position as the SV/Tech industry information feed. As many tech entrepreneurs read it — both within Silicon Valley and globally — and view the information news feed to be their target for announcing themselves to the world, Crunchfund will have access to deal flow to these diverse and early stage companies. Some of these companies will be the kind of early stage companies with billion-dollar potential that Greylock invests in.”

There you have it: No one can afford to be out of the deal flow in these times, even if it means cutting corners.

While TechCrunch’s owner, AOL, said Arrington will no longer be managing editor, with only writing duties at the site he dominates and with no editorial control, Hoffman’s use of TechCrunch for CrunchFund was accurate, because in the eyes of many they are interchangeable.

That’s due to the fact that Arrington still breaks or is clearly the source for important stories on the site and, more importantly, is the big swinging dude who attracts all the eager entrepreneurs to the party. He is the fulcrum of that site, even as it has grown.

And so it will remain, I am guessing, no matter how much AOL insists it will not be so, because the easy questions pile up quickly:

Will Arrington keep doing what are clearly news stories, for example, even though he protesteth too much — as he did in the New York Times yesterday — that he is not a journalist?

And, if so, is it right for him to do so given his insider status, creating a nonparity of sourcing and crystal clear conflicts of interest?

Most of all, can he resist his palpable love of news-breaking and scoops, even if he gets them in ever more unseemly ways?

As if to make it all pretty, Arrington told reporters yesterday that he has put a clause in his limited partnership agreement so he can report on anything he likes, and in any way, about his investors and their companies, however confidential, except those he invests in.

O joyous day! Freedom of the press is preserved and our sacred First Amendment can breathe a sigh of relief, now that it is enshrined in an unholy blogger-VC LP agreement.

After pausing for a moment so that Thomas Jefferson and Edward R. Murrow can stop spinning in their graves, you can go down this road for many increasingly bumpy miles, which only becomes more twisted and confusing as it continues.

I finally talked to one investor in CrunchFund, who said simply and honestly: “It’s not that much money, so who cares?”

Indeed, who does care anymore about crossing what had long been very bright lines in journalism and, if you want to get all cosmic, in life?

Obviously, most of all, not AOL, or its CEO Tim Armstrong, or its head of content, Arianna Huffington. The pair, for whatever reason, decided to make a startling exception for Arrington from a rule that explicitly bars reporters at its media units from investing in the companies they cover.

That happened after he recently did a complete 180 from a previous decision to stop investing and jumped right back in, leaving Armstrong and Huffington to clean up the ethical mess.

They only made it worse, with their decision to throw journalism under the bus by letting Arrington do as he pleased, while touting how important it was for other content sites at AOL to remain more pure.

In the spirit of full disclosure, these kinds of ethical lapses are endemic these days in journalism. Case in point: The appalling phone-hacking controversy taking place at News Corp.’s News International unit in Britain.

While I cannot speak for Dow Jones, I can say that the behavior in another News Corp. property certainly takes its toll on those who adhere to higher standards at the company, especially when it comes to morale.

Thus, I can imagine how others feel at AOL — including those you-know-who-you-are silent ones at TechCrunch — who can’t and, more to the point, wouldn’t make the deals Arrington has been allowed to get away with.

It is not a good feeling, I can assure you.

And, while I have not spoken to her about it, I’d imagine that Huffington cannot be thrilled to be pushing for better journalism at AOL and trying to burnish her cred by hiring some top reporters, while also having to deal with this.

That’s okay, because Armstrong was perfectly willing to do the awkward pretzel-twist needed to explain away the controversial situation, also in an interview with the Times:

“TechCrunch is a different property and they have different standards. We have a traditional understanding of journalism with the exception of TechCrunch, which is different but is transparent about it.”

In this case, Tim, I am sorry to inform you that transparency is a complete canard and is more likely to end up covering up a lot more transgressions than it ever will reveal.

And, essentially and lazily sloughing it off by saying, “That’s just Mike being Mike,” is not going to cut it, at least not with me.

Not that any amount of tsk-tsking about it matters, I suppose, as Arrington finally gets his fervent Pinocchio-on-a-star wish to be a real-boy VC, can add yet another tainted buck to the pile of billions his venture pals already have, and just call it another typical day in Silicon Valley.

Still, when you are the designated whiner-in-chief, it is pretty much all one can do.

Fark.com publisher Drew Curtis says he’s settled a nonsensical suit brought by something called Gooseberry Natural Resources LLC, which claimed Curtis’s site and a host of others had infringed a patent for “news release generation.”

The take-away is that Curtis says he was able to get Gooseberry to drop the suit without having to pay the patent holder a dime; he says he would have countersued but didn’t want to spend the money.

Well worth reading all of Curtis’s words on the topic, but if you’re pressed for time his Fark-ready headline will do: “Patent-infringement lawsuit against Fark settled for zero dollars. Also, patent trolls suck hairy donkey balls.”

Gooseberry’s original suit, filed in January, named several big Web publishing companies, including Condé Nast, Yahoo and AOL, via TechCrunch (you can read the complaint here via another entertainingly titled post).

Curtis says that Yahoo settled “a while back” and that Condé Nast settled this week; he says AOL is still fighting the suit. I’ve asked all three companies, as well as Gooseberry’s lawyer, for comment.

Wall Street says otherwise: AOL shares are off more than 20 percent on a day when the market is perking up, just a tiny bit – the Nasdaq is currently up 1.64 percent.

What gives? AOL CEO Tim Armstrong told analysts today that he wasn’t happy with some of the company’s results. But earlier this morning, when I told him that investors were dumping the stock, he told me a sell-off against the broad market uptick would be “hard to comprehend.”

So here’s an explainer, via Citigroup’s Mark Mahaney. The analyst didn’t lower his “hold” rating on AOL after this morning’s earnings, but he didn’t see enough to make him happy, either. We’ll use him, via the note he published today, as a rough proxy for disaffected AOL investors:

• Revenue was more than Wall Street expected, but the bonus dollars came from AOL’s less profitable network business, not its core display business.
• Meanwhile, that display business actually got weaker this quarter: If you pretend that AOL owned TechCrunch and HuffingtonPost a year ago (i.e. “pro forma results”), then display ad sales would have increased 9 percent this quarter, down from 12 percent in Q1.
• Those display dollars may have been at risk even before we were facing Maybe Recession 2.0, or whatever we’re going to call it: The company “noted significant weakness in June & July.”
• Earnings are shrinking: “EBITDA declined over 60%+ Y/Y vs. downapprox 57% Y/Y in Q1; this marks one of the biggest declines we’ve seen in years.”
• And earnings will continue to shrink in the near-term: The company lowered its EBITDA guidance for the rest of the year.

You’d think there would be a party in Redmond, Wash., today, as software giant Microsoft soundly beat Wall Street expectations in its third-quarter earnings released earlier today.

Microsoft said it had revenue of $16.43 billion for the quarter ended March 31, 2011, which was up 13 percent from a year ago. Net income was $5.23 billion, or 61 cents per share, a rise of 31 percent and 36 percent, respectively.

The surge was led by sales of Office, Kinect and Xbox and a stronger economy.

But there are shadows, too, as results were dragged down by weaker revenues for its flagship Windows unit.

The report comes as Microsoft’s stock continues to lag, declining 14 percent for the year.

Buzz kill!

BoomTown livedblogged the call for Wall Street analysts:

2:30 pm PT: Peter Klein, Microsoft’s CFO, who sounds super peppy, outlined the strong quarter, especially for its Office products.

He also mentioned some glitches, such as Microsoft’s still-struggling efforts to increase revenue per search (RPS) in its longtime search and online advertising partnership with Yahoo and the slower growth of the PC sector upon which the software giant’s Windows relies.

PC should stand for “possibly crappy,” but good-boy Klein did not say so.

Investor relations dude Bill Koefoed also read through the news, sounding at times like a sports announcer on a cable television network.

“Quuuuaaadrupled…,” he intoned about one part of Microsoft’s business.

This all went on for a while, since Microsoft has a lot of divisions. Servers & Tools. Online Services. Entertainment and Devices. Fashion & Cute Tops.

Okay, not that one, but a girl can dream.

It was all fun and games until Koefoed got to the Yahoo problem, which Yahoo CEO Carol Bartz had used as a cudgel in her earnings report recently.

Yes, it is a bummer. But soon it was back to the happy land of Xbox!

Klein said he was pleased with the results in a jaunty manner, which made me desperately wish Microsoft CEO Steve Ballmer led the call.

Because he’s always one obnoxious query away from a volcanic popping off.

Which is why I love those Yahoo calls and Bartz.

Buzz kill!

2:54 pm PT: That was fast–the call was quickly into questions.

The first is about COGS–cost of goods sold–and how it impacts gross margins.

Klein said the expenses were volume driven. I’d explain, but then I would fall asleep.

The next question was about stock buybacks.

That might get the stock up. Yeah, said Klein, they’ll keep doing that–not that it has helped much on the share price front.

More and more questions, about the PC market, the issues at Yahoo (let’s get that RPS up!), the Windows Phone 7 business.

I’ll be honest, I was a bit bored and started reading a riveting Business Insider interview with TechCrunch’s Michael Arrington on his myriad conflicts of interest related to his tech investing while also blogging as a news guy.

Whatever you think about him, that dude is good copy.

Wait, back to growth rates for Office!

It’s going great, said Klein (hey, maybe Arrington will invest!).

The call wraps up on news of an upcoming investor conference, being held near Disney World.

Oooh, party time!

Would it surprise you to know that BoomTown doesn’t really care anymore if TechCrunch editor Michael Arrington sidelines as a blogger while he makes investments in tech companies his tech news site covers?

In a post yesterday, titled “An Update to My Investment Policy,” Arrington made his seemingly cogent arguments that plenty of disclosure made it all “fine,” took one of his typical look-at-me swipes at anyone who dared to question this logic (apparently, we’re crappy “direct” competitors, so we haters have no standing to comment!) and presumably went on his merry investing way.

While I was first irked–because it was an appalling show to many of us cranky standards-insisting whiners–I soon realized Arrington had made a good argument about who he is and, frankly, who he has always been.

In other words, it’s a kind of there-he-goes-again thing, vaguely icky but hardly surprising and completely genuine.

Meanwhile, his new boss, AOL content head Arianna Huffington, pointed me to his post in an email.

When I asked her for an on-the-record comment, as usual, she politely and quickly complied, writing in support of Arrington:

“TechCrunch is committed to transparency. Michael has written about the guidelines he follows–that he rarely writes about companies in which he is an investor, and that, when he does, he clearly discloses this information. The same rules apply when TechCrunch’s writers cover these companies.”

Hold the phone.

Because while I kind of understand where Arrington is coming from, what I don’t understand is how this kind of convenient and on-the-fly rule-making can govern a much larger company whose strongly and repeatedly stated goal by Huffington herself is to create quality journalism.

Since I believed Huffington–whom I like very much as an Internet figure and as a friend–I was confused at what the rules for the whole of AOL content were now.

That’s why I sent her a long new list of questions to answer, which are:

1) What are, if any, the ethical guidelines about making investments for the editorial staff at HuffPo media group properties?

2) Since Arrington now seems to have permission to do so from you, can other editors at AOL properties do the same–that is, make very adjacent investments to what their site covers, as long as they disclose it? For example, can an editor who runs the entertainment site make investments in entertainment companies she/he has coverage responsibility over? (By the way, did you give him permission to make these investments? Did he ask?)

3) Is there anyone who polices what is fair coverage of competitors–i.e. companies competing with companies your editors invest in?

4) If an editor makes investments in a company and someone who works for them writes about that company, does that editor have to recuse himself from the story? Is that even possible?

5) Since you just fired someone for what you called an ethical breach–asking freelancers to work for free and also seemingly defending an attempt to curry favor with an advertiser/client–why is this not an ethical breach?

I had a lot more questions, still unanswered by Huffington, but you can see where this is going.

Simply put, does AOL, which is touting itself as a 21st-century media company, need to have 21st-century rules of the road? Or perhaps not so much?

UPDATE: Now, it is a real clown circus at AOL, with the company declaring that editorial personnel cannot make investments, except Arrington!

“As a rule, in order to avoid conflicts of interests, AOL Huffington Post Media Group editors, writers, and reporters may not have a financial interest in a company or industry that they regularly cover,” AOL said in a statement to Business Insider today, even though I nicely asked for a comment on the issue yesterday. “Arrington operates from a unique position.”

And how! Where do I get such a faboo ethical hall pass from Content Principal Huffington?

I suppose I should go all slouching-towards-Bethlehem here, and wring my hands over this unusual ruling, but what’s the use?

As you might have read: “The best lack all conviction, while the worst are full of passionate intensity.”

How did this all start, especially since I feel like this ridiculous tempest in a Silicon Valley teapot over Arrington’s investment-making might actually be my fault a little bit?

Here’s why:

On Tuesday night around 10 pm (just when I start getting revved up), I wrote a testy email to Arrington’s bosses at AOL–Huffington and CEO Tim Armstrong–as well as the Internet portal’s sharp PR head, asking for a response about what seemed to me to be a glaring conflict of interest at TechCrunch related to new investment activity by Arrington and the site’s coverage of those particular companies he had invested in.

It was all disclosed, of course, but it still felt, as I said, icky.

And, given the recent and loudly stated goal of promoting quality journalism by Huffington–including the recent dismissal of AOL’s Moviefone site editor over what the company considered ethical lapses–it seemed pertinent to ask.

Mostly because I don’t think they actually knew much–if at all–about Arrington’s increasing investing action. Armstrong said as much in an email to me, and Huffington assured me they were going to check it out tout de suite.

But rather than the answer I was waiting on, up popped Arrington’s missive yesterday, which I assume came after his bosses asked for some info on this.

In it, he explained his controversial decision to go back into investing again, in what is clearly a more significant manner.

It was a practice he had abandoned years earlier, apparently after being pecked by detractors for it.

But, dear readers, no more! Let Arrington be Arrington!

And that seems to be a talented blogger with a flare for the dramatic, with a clearly sharply-honed news nose and sassy writing skills, but a scribe who much prefers to be a playah than just an observer and chronicler of that play.

And, after more reflection, I thought: Well, maybe it is a better idea for Arrington to go play with all the boys in Silicon Valley, which would probably be more fun than taking flack for lack of traditional journalistic ethics he never ascribed to in the first place.

I once jokingly nicknamed Arrington Yertle the Turtle after the Dr. Seuss book on one dubious king of one small pond in Sala-Ma-Sond, after he went particularly nuts on the topic of news-embargo breaking.

That diatribe on how he saw news rules–which is to say, there aren’t any that bind him–was vintage Arrington, too. And, after reading his latest post, I suddenly realized that it’s pointless to give a turtle a hard time for not being a fish.

But Huffington is another story. She has put herself in word and deed right into the center of the debate on where news is going on the Web, especially after AOL paid $315 million for her Huffington Post news and opinion site.

Huffington has certainly taken a lot of hits over the years as the HuffPo has grown, some deserved, but she has clearly led an impressive effort.

In fact, I think the cute-kitten and celebrity-loving angle played up by her detractors to dismiss her is silliness, because she and the Huffington Post are clearly more than that and are obviously having a major impact on the future direction of content in the digital age.

But that power she has sought also gives her a responsibility to say exactly what that means on a real and granular and consistent level, beyond the platitudes of wanting to make great journalism that she declares all the time now.

In other words, very specifically: What does Arianna Huffington stand for in regards to journalism? What are her rules and standards and codes? And, perhaps more importantly, what does she not stand up for?

These are questions I hope Huffington–who is really good at smacking back at criticism, too (See: the New York Times’ Bill Keller)–will address in one of her patented blog-xplosions and many times over, too.

Until then, here’s a link to my very long and very detailed ethics disclosure on All Things Digital, which is exactly how our little site thinks it should be in the digital age.

In short, besides signing the Dow Jones Code of Conduct–standard at The Wall Street Journal and other DJ publications–all our editorial staff is required to also pen their own in-plain-English personal and detailed account of disclosures that are pertinent to their job.

(You can read an extensive interview with me on the subject, in fact, which was posted here by Two Bananas Marketing, this week.)

My ATD disclosure is probably the most detailed of all of them, since I gay-married Megan Smith a dozen years ago. She later became a VP at Google, which I cover from time to time, especially related to other companies I focus on more, such as Yahoo.

Most of the time, if you care to read my posts on Google, I am probably tougher and snarkier than not, mostly because I know the search giant from its earliest days.

And, even though I once wrote extensively for the Journal about Google since its founding and before Megan arrived there, I thought it wise to lay it all out in detailed detail.

(By the way, if you want to try to tweak me by asking what News Corp.-owned Fox News’ ethics rules are, I don’t know, as ATD belongs to Dow Jones, which has had them forever. I will say, though, that Roger Ailes often freaks me out.)

In any case, as Arrington preaches, the more disclosure the better, and perhaps I should say even more so here, given the current swirl, by noting explicitly that I garner exactly no financial benefits from my relationship with Megan.

That might seem odd, because she certainly earns more. But I don’t know how much nor do I ask, since we have separate bank accounts and she always pays up–well, almost always–when half the bills are due. While it sounds painfully un-romantic, we only spend overall what each of us can afford equally in an exact 50-50 split.

In addition, I also legally signed away all rights to inheritance–although I had no such marriage rights in the first place, being gay–of Megan’s assets, which are in a trust for her relatives and our sons (for when they are too old to have any fun).

More to the point, I believe this makes me the only person to marry an exec at a hot Silicon Valley company with no prospect of any gold-digging.

Thus, I clearly would make the worst investor ever–not that I ever invest in tech or plan to while I am a reporter covering the sector.

Thank god, I suppose, that Michael Arrington is there to take up the slack.