Internet
The doors – made of glass and requiring a company key card to pass through – stood in AOLs New York headquarters, separating the offices of executives like former CEO Randy Falco and his No. 2, Ron Grant, from the rank and file.
The doors departure is emblematic of a shift under way at AOL. Armstrong, 38, was recently hired away from Google Inc. and asked to give the long-suffering Internet unit of Time Warner Inc. yet another shot at salvaging its future after what seems like a lost decade.
If nothing else, Armstrongs arrival has thrilled employees who were unhappy under his predecessors, who were widely considered out of touch and out of place.
But Armstrongs more approachable style wont be enough to restore AOLs luster. AOLs legacy business, its dial-up Internet service, continues to dwindle while its newer online advertising service is not yet picking up all the slack. AOLs operations still make money, but that profit has been falling.
Armstrongs ability to find the right formula could be especially put to the test if Time Warner formally separates itself from AOL by spinning the Internet division off into a standalone business, as the company is exploring. That move would finally undo the $147 billion deal in which AOL bought Time Warner in 2001, which became one of the worst corporate combinations in history.
AOL would not make Armstrong available for comment. But current and former employees said his open management style, which he tried to show by taking out the doors, already has marked a stark change from Falco and Grant, who had snippy nicknames at AOL like “Rondy,” a combination of their first names.
Falco and Grant joined AOL in late 2006 as part of a surprising management change by Time Warner that ousted AOLs then-CEO, Jonathan Miller. Falco had been president and chief operating officer at NBC Universal Television Group, while Grant came from Time Warner, where he was senior vice president of operations.
Falco was a terrific media executive but he didnt have Internet experience, and Grant was talented but had not managed large teams of people, said Ted Leonsis, an executive who retired from AOL in late 2006.
“You had two very good executives who were perhaps miscast at that time,” Leonsis said.
In contrast, Armstrong is steeped in the Internet. At Google he was a senior vice president in charge of the companys North and South American advertising operations.
“For what they need going forward, I think that somebody from the Internet, with Internet credibility, was a good idea,” Falco said in an interview.
Falco defended his tenure at AOL by noting that he had the tough job of cutting costs – $2 billion was slashed, with 2,500 layoffs, in his tenure – something that “never makes employees happy.” He also refuted the idea that he wasnt communicative, saying he met weekly with employees in small and large groups.
This all may bode well for employee morale, but it doesnt mean AOLs business prospects have improved.
The dial-up Internet service was AOLs backbone when the company, then known as America Online, bought Time Warner in 2001. At its peak, in 2002, AOL had 26.7 million dial-up subscribers. Even as recently as 2006, dial-up was a $5.78 billion business for AOL.
But consumers have flocked to speedier offerings. Last year AOLs Internet access revenue was down to $1.93 billion, and now AOL counts just 6.3 million dial-up subscribers.
Meanwhile, other Internet destinations have eclipsed AOLs free Web site, too.
In hopes of staunching the defection of users to competitors like Google and Yahoo Inc., in 2004 AOL began shifting from its origins as a “walled garden” with subscriber-only content to an online destination where most of its news, music videos and other features were free, and supported by ads. AOL beefed up the freebies in 2006 by giving away AOL.com e-mail accounts and software that consumers had previously paid for.