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Summary:

The Wall Street Journal today writes about AOL’s survival strategy and how it revolves around Platform A, the online advertising platform/division that the company hopes will help it recover from the loss of its dial-up business. AOL has spent nearly a billion dollars to put together […]

The Wall Street Journal today writes about AOL’s survival strategy and how it revolves around Platform A, the online advertising platform/division that the company hopes will help it recover from the loss of its dial-up business.

AOL has spent nearly a billion dollars to put together Platform A, buying Lightingcast (online video ads provider, for $100 million in 2006), Third Screen Media (mobile ads, for $105 million in 2007), AdTech (ad serving, 2007, price undisclosed), Tacoda (behavioral targeting, for $274 million in 2007), Quigo (contextual targeting, for $347 million in 2007) and Perifilliate (click-per-action marketing, for $125 million in 2008).

But as the WSJ points out, things haven’t been going well for the division. Personally, I would give them a failing grade. In its first six months, Platform A has:

1. Missed sales targets
2. Become rife with political infighting
3. Dismissed its president, Curt Vebranz
4. Lost most of the senior managers that came with the Quigo and Tacoda deals
5. Appointed Lynda Clarizio as new Platform A chief

In addition, AOL has seen its ad revenues growth slump, to 12 percent in 2007 from 37 percent in 2006. AOL’s deal with the University of Phoenix, which brought in $215 million, is over. It was one of the big contributors to AOL’s ad revenues last year. At the same time, more competition is coming. The Google-Doubleclick combo isn’t good news for Platform A by any means.

Interestingly, the article doesn’t really touch upon what ails AOL and, to a larger extent, Time Warner: A culture that accepts mediocrity and believes they can buy their way out of trouble. All you get is a company that is plodding along — and is almost always behind the times. The Platform A plan, however great it might seem, is just further proof of just that.

Disclosure: I am a former employee of Time Warner.

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  1. Om,

    Your story underscores a fundamental point that a lot of big companies struggle with; namely, the fact that assembling a bunch of ‘chicken parts’ does not magically translate to a living, breathing chicken.

    Part of this is just a by-product of the inherently silo’d nature of such companies, which makes it hard to orchestrate 1+1=3 types of unfair advantages in the way that Apple does so well today (and Microsoft used to in the past).

    That said, while it is perhaps unsurprising to see an old media company like Time-Warner struggling with this reality, it’s not like Yahoo in the new media space has done any better with a comparably rich set of assets.

    In other words, this stuff is just hard to execute on, and for every M&A master like Cisco there are a multitude of less inspiring players.

    Netting it out, companies need to decide whether they see themselves as being in the platform business, and if they do, they need get religion about what ‘platform’ means from an integration and going forward value proposition perspective.

    My experience is that in the M&A scheme of things, companies tend to be better at the ACQUIRING of assets than the MERGING and integration of them, which is another part of the problem.

    For what it’s worth, I have recently blogged on the ‘pipes versus platforms’ topic. Here is the URL:

    http://thenetworkgarden.com/weblog/2008/02/pipes-platforms.html

    Check it out if interested.

    Cheers,

    Mark

  2. Time Warner Begins Death by 1,000 Cuts – GigaOM Wednesday, April 30, 2008

    [...] or sale of the diminishing AOL access line business, which Time Warner plans to separate from the flailing Platform A advertising [...]

  3. AOL’s Third Screen Media Serving Up Spam? – GigaOM Sunday, June 8, 2008

    [...] Om Malik, Sunday, June 8, 2008 at 6:47 AM PT Comments (0) Jeff Bentley, a reader of our site accidentally stumbled into what seems like a hack by spammers of Third Screen Media, a mobile advertising company that was acquired by AOL in 2007 for $107 million and is now part of Platform A. [...]

  4. Hey Hey Platform A, How Much Money Did You Lose Today? – GigaOM Monday, June 30, 2008

    [...] social network advertising. Obviously the bigger that category grows the better it is for the struggling Platform A (and Facebook’s attempt to defend a $15 billion valuation.) Undoubtedly Platform A will net [...]

  5. Is Time Warner Having Second Thoughts About Bebo? Wednesday, December 24, 2008

    [...] acquisition. Time Warner has spent nearly a billion dollars to build AOL’s Platform A advertising business, which continues to struggle. No wonder Bewkes is saying no to any more deals for now! That means one less [...]

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