It was January of 2000 and I was in my usual Tuesday morning breakfast group with my friends at Jim's. We spent time talking about life, family and business. My friends Matt and Shawn were far wiser than I when it came to business and technology (successful tech entrprenuer and Harvard MBA, respectively). I was still learning the tech space and was just months away from co-founding my first tech company. Despite my poor track record (I had recently bought stock in Pancho's Mexican Buffet.... don't laugh!) and lack of experience, I saw this disaster coming. From the early days of the internet, I was there. (You may remember me as email@example.com)
I had an AOL account even before those CD's started showing up at the checkout line at 7-Eleven. I didn't know much, but I did know that marrying a red hot new technology company with an old school media firm was a bad idea. It couldn't work and it didn't work. When the AOL-Time Warner merger was announced in January 2000, the combined market capitalization was $280 billion. Today it is $28B.
So here we are, eight years and billions of dollars in lost shareholder value later. Now what? First of all, the spinout makes perfect sense. It will allow Armstrong and the gang to attempt to rebuild a once proud company into something at least relevant. It also positions AOL to be a new media company by finding creative ways to leverage the assets (audience) into profit. I saw the plan and I think it makes sense... Silicon Alley describes the heart of the plan as making AOL more "Google-y". There is white space below Google. They own a ridiculous share of the search market and someone will take away market share over the next few years. Add to that that online advertising continues to grow while traditional media implodes and poof, you have a market opportunity. AOL is uniquely positioned to play in this space if they fully leverage their assets including ADTECH, Platform A and others. Remember when you went to America Online, errr... I mean AOL, to read content? They have audience, content and connecting the dots means revenue growth. I am pulling for them now, in 2000 I was not. The strategy then was to try and retain the "walled garden" approach and milk dial up income for as long as possible.... bad idea. Good luck Tim, you'll need it. But you have a shot, and that puts you well ahead of your friends back in 2000. Tom Cuthbert