Tech wrap: AOL talking merger with Yahoo?
AOL Chief Executive Tim Armstrong has reportedly approached private equity firms to gauge interest in a deal with Yahoo that would place Armstrong as the head of the combined company, according to a Bloomberg report.
CNBC later reported that a source close to Yahoo said the company had no interest in a deal with AOL.
AOL shares closed down 5.3 percent at $14.72 while Yahoo inched up 0.3 pct to $14.48.
Both former tech powerhouses have fallen on tough times and Reuters.com columnist John C. Abell says: “It’s impossible to know if anything short of IBM-like reinvention could have altered the course of these two companies so that the music playing now would still be more jazz than dirge.”
In other AOL-related news, Xconomy blogger Wade Roush argues that the “explosion of criticism” over TechCrunch founder Michael Arrington’s plans to create a startup seed fund has finally convinced Armstrong that “yoking a formal venture fund to a journalistic operation would make the (real or perceived) conflicts wholly unmanageable.”
Apple Inc scored a symbolic legal victory in efforts to keep its lead spot in the tablet computer market when a German court upheld a ban barring Samsung’s local unit from selling its Galaxy 10.1 tablets in Europe’s biggest economy.
A new iPhone application aims to make social networking truly social, with the help of geo-location technology.
Tech Summit Q&A, day 1: AOL’s Tim Armstrong, Arianna Huffington
AOL CEO Tim Armstrong and Editor in Chief of The Huffington Post Arianna Huffington joined us Monday for the premiere of the 2011 Reuters Global Technology Summit.
Here’s a clip of Tim Armstrong answering why he thinks the expansion of AOL’s local news service Patch is a sound investment.
And another clip of Tim Armstrong, this time talking about one of two Tech CEOs he admires:
Who’s the other one? Jeff Boyd from Priceline.com.
“He doesn’t get brought up much but he’s one of the best leaders in the Internet space. Very quiet but outstanding results,” Armstrong said of Boyd.
David Eun Exits AOL after Huff Po purchase
Another high-level AOL executive is heading for the exit door after the company shifted its content strategy again with the $315 million acquisitionof the Huffington Post. David Eun (pictured left), the ex-Googler recruited by AOL Chief Executive Tim Armstrong to be president of AOL media and studios, is leaving. Eun is a causality of the Huff Po purchase that put the charismatic high profile founder Arianna Huffington in charge of AOL’s content.
In a memo to AOL employees posted on AOL’s technology blog TechCrunch, Eun described how he and Armstrong tried to find a place for Eun at AOL after the acquisition.
“I came to AOL last year to be the leader of the media organization. With the historic acquisition of The Huffington Post, my role and responsibilities as President, AOL Media are changing. Tim and I have discussed at length how I might continue within the new organizational structure, but ultimately there isn’t a role that matches what I am seeking to do.”
Eun was not immediately available to comment.
It’s the latest of a long list of switches and departures at AOL as the company attempts to turn itself into a media powerhouse dependent mainly on advertising revenue and tries to move away from its lucrative but dying dial-up business. At first, AOL’s Armstrong made a big deal about scooping up journalists to turn out original content around politics, sports, health and entertainment. That idea fell by the wayside as AOL decided to either outright buy that content — such as the purchase of the influential tech blog TechCrunch and Huff Post – or simply outsource it.
PaidContent’s Staci D. Kramer has the low down on the AOL executive shuffle and changes to the structure. Eun tells Kramer: “It’s not easy but I go back to why did I come. The job I came here for isn’t exactly the job that’s going to be available after.”
(Photo from AOL corporate site)
Huff Po? God, I get tired of useless anagrams when they aren’t necessary! It makes me less likely to read the articles when they start off by irritating me.
AOL aspires to be a 1990s publishing powerhouse; arms dealer
Tech nerds and gadget geeks over the age of 35 should have no trouble recalling the company Ziff Davis – a former publishing powerhouse home to such magazines as Computer World, PC Week and Red Herring. Ziff’s glory days were in the 1980s and 1990s and it scaled dizzying heights as its magazines groaned under the strain of advertising. Media observers would weigh issues of say Computer World for sport not unlike putting the September issue of fashion mags on the scales.
In 1995, a majority of Ziff was sold to SoftBank for $2.1 billion. Yet, Ziff’s storyline is familiar to a wide swath of Silicon Valley companies that prospered in the late 90s. The tech bubble popped and by the late naughts Ziff Davis Media headed to bankruptcy court.
Ziff Davis is apparently on the mind of Tim Armstrong (pictured) . The AOL chairman and CEO invoked the company yesterday during his presentation at the Citigroup Media, Entertainment and Telecom conference.
Here is Armstrong explaining how TechCruch and other assets such as Engadget are material to AOL:
“If you even go back to look at the valuations of a Ziff Davis or companies like that in the tech space, AOL has assets that considerably could be considered the Ziff Davis of the Internet.”
Also: AOL wants to be an arms dealer. Here is Armstrong on why Facebook is not a threat:
UPDATE: AOL loses key editors; still says it’s home of premium content
AOL is losing more key writers and editors, including the head of AOL News. Mike Nizza the editor in chief of AOL News is decamping for News Corp. World editor James Graff is departing to take the managing editor position at The Week and James Burnett, AOL’s enterprise editor, left for Rolling Stone. Daily Finance Senior Writer Sam Gustin is headed to Wired.
It’s a blow to AOL which has boasted of becoming an online media and entertainment powerhouse known for its premium content.
AOL emailed the following statement: “We are building a world class organization and are committed to being a leading producer of high quality original content. And we are growing our organization everyday. ”
Since taking over AOL, Chief Executive Tim Armstrong has been very vocal about scooping up more than 500 journalists, among them nine Pulitzer prize winners and two voters who pick the Heisman Trophy, awarded each year to U.S. college football’s best player.
But several former AOL executives have complained that the current management is still casting about for a content strategy, shifting priorities and resources away from content produced by professional journalists and toward other projects like $50 million dedicated to the hyperlocal Patch, a network of community news site that relies mainly on the community for contributions.
“We don’t believe the content on the Web will only be created within our walls, let’s be clear about that,” David Eun, president of media and studios at AOL told Reuters. “A lot of great content is created originally within our walls … It’s our job to bring the best out there and mix it internally so our audiences get the benefit of both.”
(Image courtsey of AOL)
AOL and its Content Strategy
AOL turned 25 today, prompting Chief Executive Tim Armstrong to make the rounds with co-founder Steve Case to celebrate the milestone. AOL has a colorful and much chronicled history, which we won’t go into detail here. What is most interesting to this reporter is not AOL’s past but rather its plan to pitch itself forward as a content company just at the point when traditional media — we’re looking at you newspapers – are undergoing wrenching operational changes.
All of this is to say that content, especially good local content, is expensive to produce even when the plug has been pulled from the printing presses.
Yet AOL executives believe there is a vein to mine and have been snapping up professional journalists while casting wide nets to capture “citizen reporters” eager to get their names out by covering the goings-on and activities at the neighborhood level. AOL is hiring expensive professionals to complement inexpensive user-generated content tied to search engine optimization. Ad dollars, the company hopes, should follow thanks to its technology platforms that AOL believes can maximize ad revenue.
When asked about advertising opportunities going forward during an interview today, Armstrong relayed this story –days after upbeat broadcast executives unveiled their prime time programming to advertisers known as the upfronts.
Armstrong had met with one of of the top 20 advertisers in the world last week and said, “This was the first year that they have actually planned digital before they did their TV upfronts. I think that is a trend happening in the industry. … [The] industry analysis is probably undercounting the fact that you are seeing fundamental shifts that people are starting to plan digital before they plan the TV upfronts. My guess is there will be more and more pressure in that direction going forward.”
Case, who is now the chairman and CEO of Revolution, added that more and more people are spending time online at the expense of reading magazines and newspapers or watching TV. ”Obviously advertising is going to track that audience not just the number of people using it but the amount of time they are using it. You can debate how quickly that will happen but you can’t debate inevitably the dollars will shift towards the digital medium because that is where consumer attention has shifted.”
The upside of shutting down Bebo for AOL
It might seem obvious to most observers that AOL would want to cut its losses and get out of Bebo sooner rather than later, especially after it confirmed yesterday it was evaluating strategic options for the struggling business (ie shutting it down or selling it).
AOL CEO Tim Armstrong (pictured, left) has been pretty indifferent about the fading social network’s prospects ever since he came on board last year — though he did initially promise to hold on to it.
But Credit Suisse analyst John Blackledge points out in a client note that Bebo’s burdensome $850 million price tag at the time it was bought might serve some beneficial purpose for AOL after all:
Any sale would likely generate (far) less than the $850 million acquisition price, creating a tax loss, which could be used in the future against any capital gains (if AOL were to have any).
The other (and best) option for AOL would be to close Bebo, effectively deeming the asset as worthless and taking a loss deduction.
The second option would let AOL write off that $850 million and create a future tax benefit through a net operating loss (NOL) asset, Blackledge explains. He does, however, add the caveat that it’s not clear if the IRS would allow AOL to treat Bebo as an abandoned asset but it is exploring that option.
If Blackledge’s analysis is right, then perhaps the surprising thing is that AOL, which was spun off from Time Warner late last year, still has Bebo on its books at a $850 million valuation. One can only speculate this may be why Time Warner’s management never explicitly said it was writing down Bebo’s value when it took a $25 billion writedown charge in the first quarter of 2009 — it was looking out for the soon-to-be independent AOL.
BEBO has its own unique style of creating profile skin layouts, changing modules, having polls, quizzes, playlists, groups, widgets, photo albums.. so many diferent things to personalise ur own profile that tells who you are, unlike the famous facebook! ive had bebo since 2005, i love bebo. but eversince AOL bought bebo, they have dug up a pit and dragged bebo to it and now tryin to dump it!! it’s AOL’s fault for makin alota huge changes and stuffing up bebo, it’s AOL’s fault for not listening but ignoring beboers who use it and so it’s us who knows best.. it’s no wonder why us beboers move to facebook, bcoz of the fault of AOL! …
Barry Diller’s take on Microsoft, Yahoo and more
Few in the media business know dealmaking better than Barry Diller.
So it comes as little surprise that the head of IAC/Interactive was asked about both the Microsoft-Yahoo deal and the AOL separation during an earnings conference call today. He sounded upbeat on both situations.
Here are some excepts:
Microsoft-Yahoo:
One significant thing that happened is we’re not going have to talk about whether or not it’s going to happen anymore [Ed -Amen to that!]. Look, Microsoft will be able to report a greater share in terms of search and get — at least in some minds of the talkers — into being up there in competing terms with Google. And Yahoo doesn’t have to spend anymore money on search. As far as being able to execute, that is very complicated.
For us, I think that the significance is we want, need, must have at least two competitive forces, big competitive forces… I want to have two players out there wanting to get our incremental business, which is, of course, of real value to the companies.
So, I think it’s good for all parties.
AOL:
On AOL, I have a lot of confidence in Tim Armstrong. I think he’s coming there as a great whoosh of energy and real change, I think, for the first time, in my god, in I don’t know how long.
I have high expectations for what he’s going to be able to do.
As far as strategies with the spinoff company or the company’s configurations in the future, we’re talking with them about ideas about commercial relationships and both in the local area and search area. We’ll see what happens.
There is no possibility of really speculating beyond the fact that it’s obvious there are interesting relationships between what AOL does and what aspects of IAC does.
We’ll have to wait and see.
Now that Yahoo will let Bing power its search, Microsoft still needs the same alliance with Ask.com in order to have a chance of competing against Google Search.
AOL CEO: We still like TMZ and TMZ still likes us
AOL Chief Tim Armstrong has done several interviews with the press to mark the first 100 days in the role. In most of the articles he explains his focus on advertising primarily built around AOL’s collection of premium content brands.
No brand is more premium right now, in advertising terms, than TMZ.com, the Hollywood gossip website AOL jointly owns with Telepictures. Both AOL and Telepictures are units of Time Warner Inc.
TMZ is currently one of the hottest properties on the Web, especially after it was the first to break news of Michael Jackson’s death. In the Web advertising world it caused a bit of a stir by deciding to handle its own advertising sales rather than use the girth of AOL’s team.
Armstrong said he is not too concerned with TMZ’s strategy as such. He said he supports TMZ doing whatever is best for TMZ to make it even more successful.
In general, TMZ has become a fairly major brand. When brands get that big, having sole representation in the market potentially makes sense. For us, job No . 1 is for all our properties to be successful. I think we would be very enthusiastic for TMZ to have the most successful outcome. We’re not sensitive about what TMZ wants to do for the ad sales.
What is less clear, though, is TMZ’s future ownership. It might become wholly owned by AOL, which is currently building up it content sites with recent acquisitions such as MMAFighting.com and Patch Media. This is all Armstrong would say for now:
As we separate from Time Warner, TMZ is one of the areas that needs to be discussed.
AOL’s Tim Armstrong’s more worried about Main St than Wall St
AOL’s recently appointed chief executive, Tim Armstrong, has only been in place for three weeks but Wall Street is waiting impatiently for his next move. He’s started to shake up the ad team. Investors are focused on when parent company Time Warner will spin off the Internet unit, which has lost favor with Wall Street, advertisers and users alike.
Armstrong, gave his first interview since starting on April 1 to Ad Age Editor Jonah Bloom at the 4A’s advertising conference in San Francisco. Though he has declined doing interviews since he joined, AOL’s communications people said Armstrong was keeping a commitment he’d made while he still at Google.
The three-part interview can be seen at Ad Age here. The fireside chat covered topics like AOL’s branding, AOL’s undervalued ad space, and how Armstrong had to leave Google by the tradesman’s entrance on his last day.
Asked whether AOL’s standalone valuation could once again be worth $20 billion, which it theoretically was until Google wrote down its 5 percent stake in AOL to effectively give it a value of $5.5 billion in January, Armstrong said:
5.5 (billion) in my book is still a lot of money…I’ve said internally to employees Wall Street cares about you, and Main Street cares about you, and until we get Main Street caring about our company everyday (and) every time they touch the product and service, the valuation doesn’t matter because the worst case possible, the thing that happens at Internet companies is, you see, it is that people vote with their clicks and over time unique users go down.
At AOL, one of the things we’re focused on right now is how do you actually turn the unique users around and go in the right direction. More than valuation, more than anything else, if people are voting with clicks about our products and services, that will mean a lot more in the future of the company than the valuation.
Of course, Armstrong recognizes $5.5 billion is a lot of money because many Wall Street analysts now value AOL at between $2 billion to $3.5 billion. The analysts base their valuations on estimates of the terminally declining discounted cash flows from its dial-up business, along with estimates of cash flow from the struggling online advertising sales.
I actually think AOL is overvalued right now. THey have been shedding customers and ad revenue is dropping so where is the value?
