The Next Step for AOL

Tara Taghizadeh

Full disclosure: I worked as a writer at AOL from 1996-98, and again in 2010. The first time around, lured by the new world of the Web, I found myself at a company where young and relatively inexperienced employees wound up with stock options, allowing them to retire with a cool million after four years of service.

 

Back then, AOL painstakingly attempted to give off an aura of a young, hip, trendy company, which hired equally young, hip, trendy visionaries who were making leaps and bounds in the technological field.

 

Beer flowed freely at on-site events, ping-pong and pool tables spotted the work space, and the message was: Welcome to the party. I left in 1998, disillusioned with the complete lack of professionalism and bizarre pettiness that was apparent amongst AOL staff and, in particular, in my department.

 

The oddity was that, all the while, AOL demanded fierce loyalty to the job and most of its employees seemed to lack a social life outside of the office. Colleagues were friends in and out of work, and many were inept at creating a niche for themselves away from the AOL campus.

 

In 2010, I returned for a few months as a contract writer; by this time, the party atmosphere had died down, the work atmosphere was much more pleasant, and the staff were all professional.

 

But AOL has been on a decline for a while, largely as a result of the 2000 merger with Time-Warner, from which the company never fully recovered. These days, AOL is on the one hand acquiring new businesses, while on the other, rumors abound about whether the company will be put up for sale.

Enter the Huffington Post

With CEO Tim Armstrong, the former Google executive, at the helm, AOL recently decided that in order to survive, the company would now fashion itself as a news and content provider. This was an odd move for a company that, early this year, sent out a humiliating memo (obtained by Business Insider) advising editors to select topics for coverage based on “traffic potential and revenue potential….” and to base their content selection on “the profitability consideration.” Little did the authors of said memo know that no self-respecting journalist would ever cover a topic based on its sole ability to boost “profitability.”

 

Perhaps this is why a merger with the Huffington Post made sense. Considered by more serious journalists as largely fluff, the Huffington Post has proven itself as a successful content aggregator, and even though the site has hired a handful of seasoned journalists, who on occasion produce interesting, newsworthy articles, overall, HuffPo has the look and feel of a tabloid (and is peppered with contributing pieces by famous “friends of Arianna”). It’s a far cry from the quality journalism offered by the New York Times or the New Yorker, and less impressive than even celeb-editor Tina Brown’s Daily Beast.

 

If AOL had serious intentions of establishing itself as a contender in the world of journalism, it might have pursued a purchase of websites like Salon.  

 

According to a June 27 Forbes Magazine article, Armstrong said that “Arianna represents what the future will look like for social news.” Social news? Really?

 

AOL then announced that it had purchased HuffPo on February 7.

 

Declining Profits

According to MarketWatch, AOL’s first-quarter profits took a nosedive, which indicates its eight-month marriage to HuffPo has been unbeneficial. Arianna Huffington, meanwhile, appears to be fattening HuffPo on AOL’s dime. She has expanded her site to other cities, including overseas versions of the site. Said Huffington, at the TheWrap’s media leadership conference in September:

 

“Since the integration, the Huffington Post has grown 49 percent and added 24 sections… My dream was to grow in multiple ways at the same time, but we didn’t have the resources available to do that before. All of these new launches we wanted to do would have taken years.”

 

Continuous Layoffs

The merger seems to have benefited the Huffington Post while a number of other AOL sites seem to have fallen to the wayside. In March of this year, a few hundred staff members were laid off, mostly those involved in editorial aspects of the company. Even seasoned journalists with solid backgrounds, including Melinda Henneberger (formerly of the New York Times) and Jonathan Dube (a former ABCNews.com executive), were let go after Arianna Huffington’s arrival. In an unusual turn of events, Huffington and company then set out to hire new journalists to replace the ones they had just laid off.

 

AOL has been treading on shaky ground for a while. Layoffs have taken place in 2007, 2009, 2010, as well as this year. As it fights to carve out a niche for itself in the ever-expanding, busy world of the Internet, the value of AOL’s stock continues to dwindle.

Likely Scenario

Rumors have recently circulated that AOL will be put up for sale or will at least sell-off portions of the company, which makes sense given the company’s monetary woes. According to Bloomberg News and other sources, Armstrong is now pushing for a deal with Yahoo!, but it’s dubious as whether Yahoo! would consider such a deal beneficial

 

As Adweek reported in August, “Various analysts have suggested that the breakup value of the company, which now includes AOL's media properties, dial-up business, advertising business, and applications like AIM and Mapquest, could be significantly greater than its current market value of about $1.5 billion.”

 

The merger with Huffington Post has, so far, proved inconsequential for AOL. The likely scenario will be that in the next few years, the company will either begin to shut down or sell off subsections, or be put up for sale. What will happen to the Huffington Post at that point in time remains to be seen. It’s doubtful that Arianna Huffington will stay with the company for more than a few years, and if AOL is sold, it’s unlikely that she will continue in her current capacity.

 

Whether Yahoo! comes to AOL’s rescue now remains to be seen. In the meantime, the company that started out as a pioneer and leader in the Internet arena with Steve Case at the helm has suffered an identity crisis, and it continues to struggle to find its niche in the ever-expanding online world.

 

Author Bio:

Tara Taghizadeh is the Founding Editor & Publisher of Highbrow Magazine.

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