New AOL CEO: Be Afraid

For those who missed it, Time Warner stuck the final knife into the back of the old AOL last week, when AOL's interim CEO, Jonathan Miller, allegedly hand-picked by the outgoing Steve Case, was axed and replaced with a career TV/old media executive.  Miller wasn't an Internet expert, but he'd worked with Diller, who is (now), and he quickly illustrated that he was willing to learn.  And he did a good job, all things considered.  But now he's gone, and so is the final vestige of the original AOL, which once utterly dominated Internet-land--and, later, so mortified the old guard at Time Warner that they've spent the last five years trying to erase the nightmare.

In the short history of the Internet, few old media executives have quickly grasped the ways the new medium is different. Untold thousands, however, have charged into the fray, ready to teach the Internet kids how a real media business works, only to learn, the hard way, that the Internet really is different (not better, just different). 

So what can we expect from Randy Falco, the new head of AOL?  I won't rush to judgement, but the early signs aren't encouraging.  If today's AP summary and Falco quotes are anything close to reality, AOL is about to resume its rapid slide into oblivion:

The incoming head of AOL said Tuesday he left a 31-year career at NBC for the chance to transform the online business into a formidable rival to television and other traditional media, AP writes, suggesting that Falco has yet to notice that ONE Internet company, Google, has long been worth more than the entire television industry combined (and justifiably so). 

''I'm fascinated by the Internet space,'' Falco told The Associated Press. ''I see it as a very exciting environment to be in. It reminds me a lot about network television 30 years ago. It's a little bit like the Wild West. There aren't a lot of rules. That's what excites me about it.''

A "fascinating environment"?  Yes.  And I guess it's good that Falco's excited about his new job.  But given that the next six months will determine whether AOL lives for a decade or dies in a year, one hopes that Falco's gee-whiz attitude is quickly replaced by an understanding that the Internet's wild west days are long gone and that there are crystal-clear Internet rules--one of which is that if you're not No. 1, No. 2, or, at worst, No. 3, you're toast.  And AOL fans should pray, hard, that Falco doesn't follow in the footsteps of some of his transitioning brethren and spend his first six months on the job enthusing about a new commitment to "original programming" and "shows."

Comments

[Victor]

Damn dude, you're really back in business! Good stuff

[ZF]

Wow, stick a fork in that guy.

It seems that there is now a new version of 'internet time'. Under the old version time ran faster, but under the new one it runs instead in reverse - the value of huge assets which took years to grow and assemble are suddenly allowed by their managements to dissipate away.

Up to now we saw this primarily as a whole trainload of relatively minor acquisitions were bought and then allowed to run off the rails into oblivion. Now it's beginning to happen to entire leading web franchises. AOL: a leader on the way up and a leader on the way down.

Cool actually, if you're involved in start-ups.

I do believe that in most industries the rate of change eventually slows to the point where the 'corporate management' approach comes to dominate. On the web we don't seem to be quite there yet. There has to be something adrift when an organization like Craigslist is on a lot of measures better and more stably managed than Yahoo or AOL.

[anonymous]

He also seems to have missed the point that Google has obtained that market cap by doing essentially nothing to look, act or behave like traditional TV or other media. It sells a completely new type of advertising that is primarily tied to a completely new service (Internet search).

Hoping to one day be more like the traditional media is a sure sign of trouble.

[Neal S. Lachman]

Henry,

To criticize a man (Falco) based on just a few quotes is simply ridiculous, and I bet he also knows those things you know about valuation and the industries. This guy is a veteran of media, and while the Internet is a different world altogether, it is part of the same universe (Technology/Media/Telecom).

Why is it that people (in this case you) often underestimate and under-appreciate the know-how and knowlegde of experienced executives? By appointing Grant, Falco has proven to be a smart decisionmaker, simply because Grant is a great choice! The tremendous wealth of experience of Grant from his role as SVP Operations at TW comes on top of his previous roles at the former AOL. I read in NYT's Dealbook that Grant is "just" 40-years-old. This means him landing from SVP roles to the second most important job at AOL is a sign that this guy has a great future at TW.

In any case, with Grant and Falco heading AOL there may be some good news for the company. I don't think TW is going to hang AOL out to dry, so you can be sure that some real efforts will be made by these top-notch gentlemen. And let's be honest, the only way -for AOL- is up.

[Henry Blodget]

Neal, thanks, fair enough. I'll reserve judgement. The "formidable competitor to television," "fascinating environment," and "wild west" got me, though. About a decade behind the curve...

[Neal S. Lachman]

Now, that's the gentleman I know, Henry. ;-)

If I may further add tho... I think there's some truth in his statements. When seeing it from a strictly business perspective the Internet is basically best to be described as a wild west. Don't we all remember the approximately one trillion dollars that investors lost as a result of the telecom/internet bubble burst not so long ago?

There is a lot to be said to AOL's position as a content portal rather than just a content aggregator (GOOG). Content for Internet can easily be compared with TV content, but when you bring GOOG into the equation and compare GOOG with TV you are comparing apples and eggs.

Yes, Internet is (still) a fascinating environment. There's nothing -or at least not much- different from 6 years ago. We got 6 years older, but did we get wiser too?

You know what I really think is happening right now? Six years ago it were the investors who created this bubble. Today it is the corporate world (the companies) that is creating a bubble (reference to GOOG's purchase of YouTube). Indirectly -almost directly-, investors are going to be presented with the tab. One way or the other, when one is paying lots of money for some company without tangible assets and proven revenue streams, it is asking for troubles. Goog is a good company and it is being managed by some smart people, but was it smart to buy YouTube for $1.6B? Wouldn't it have been cheaper to create a strategic alliance? I know the purchase has not cost GOOG much outright, because it got paid in stock, but it doesn't take away the fact that one overvalued company has overpaid another overvalued company.

P/E ratios of 64.5 resulting in Market Cap valuations of $155B. The competition coming out with guns, canons, and trying to steal away parts of the business. Large cap corporations coming after Google and MySpace with lawsuits. Yahoo executives gossiping and bitching. Skype being purchased by Ebay for what was it... $4.5B? If this is not wild-westesque, then what is?

[Still Inside]

I'll go with Henry on this one, on the soundbites alone.

Either this guy does not know how to give soundbites to the press well enough to do this kind of a job, or he is what he sounds like he is, which is somebody that should be running a container company in Idaho.

Either way, Old Media types find it almost impossible to understand that the Internet is a "pull" media, not a "push" media. Look for more spam, more ads, and more losses in marketshare at AOL...

SI

[Aol employee]

I am a AOL employee and in december there was a meeting to present new projects for 2007; I won't go into details, but definetly they are trying to be a new TV network spending lots of money on new technologies and celebrities and this won't work.

They even expect to double up in advertising money because - get this - they think they can put commercials between online showings like the TV stations do.

The new managment don't understand the Internet market one bit and I have started to send out resumes!