AOL trims for sale?

July 25, 2008

randyfalco.jpgTechCrunch‘s report on AOL’s “sunsetting” of Xdrive, AOL Pictures, MyMobile and Bluestring spread like wildfire yesterday, at a time when the future of its ownership hangs in the balance.

Are these latest actions in anticipation of an AOL sale? Actually AOL’s been trimming for some time. Who hasn’t, given the state of the economy. You just haven’t noticed.

About 50 products including a video download service, a 10-foot UI experience (Internet in the living room), AIM phone line, and Tegic, have been “sunset”, we’re told.

Here’s AOL EVP Kevin Conroy’s memo to employees, dated July 14, from TechCrunch, which we also independently verified:

There was a time at AOL when the strengths of our aggregate portfolio of products more than compensated for the weakness of an underperforming product. The realities of the industry and market shifts in online advertising no longer make that possible. Simply put, every product makes a direct impact on our bottom line. With two quarters behind us, it is fair to say that results across the AOL products team have been mixed.

Personal Media: Bluestring, Xdrive and AOL Pictures will be sunset. These consumer storage products haven’t gained sufficient traction in the marketplace or the monetization levels necessary to offset the high cost of their operation.

We’ve always wondered whether AOL had too many irons in the fire. Yesterday’s TechCrunch scoop is just the latest in a long string of trimming actions that are not only considered rational given the state of the economy, but also in line with others considering the industry-wide belt-tightening. Even Google has dialed back spending like “drunken sailors” to borrow Bernstein’s Jeff Lindsay’s words.

Arrington further speculates on Conroy’s future. We’re hearing from sources that Kevin’s not leaving any time soon. Rumors of his departure have dogged Conroy for years. Still not true. Conroy, who has been responsible for e-mail, software products, radio, video, Apple-related products and mobile, will continue to do so. Nothing changes.

The memo follows on the heels of TechCrunch’s reporting earlier yesterday about budget cuts at AOL’s blogs division, with some bloggers being told to stop working for a couple of weeks. Before you hyperventilate — Engadget won’t be affected.

Also, an AOL source tells us that the budget trimming does not reflect a cut back in blogs, but mainly affected its stable of freelancers and was designed to meet budgets that shot past projections.

From the memo to blog staffers:

The most important point I want to make is that the Weblogs budget is
NOT being cut. Rather, our situation is one in which, over the past
several months, our post rates and costs have increased significantly
faster than expected. As such, we are now in a position of
significantly exceeding our 2008 budget unless we take measures to
slow down our posting costs until we can get back into line with our
budget.

It’s really that simple, and there is absolutely nothing grave about
the situation. In fact, the Weblogs budget has increased
significantly in each of the past two years, and we expect it to
increase again in 2009. Why? — because our business is thriving both
in terms of Revenue and traffic, which bodes very well for our future.

It seems Time Warner’s ongoing discussions with Yahoo and separately with Microsoft over an AOL deal has now amplified every move the Internet unit makes.

Keep an eye on:

  • DVDs getting more, not less, retail floor space. (Pali Research) (subscription required)
  • Fox reaches deal to invest in digital cinema. (Reuters)
  • Once media-shy Taliban go hi-tech in propaganda war. (Reuters)

(Photo: Reuters / AOL CEO Randy Falco)

One comment

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It appears that AOL has always tried to do too much and be everything to everybody. It’s no wonder that they now find it necessary to cut back.