AOL’s Sudden Implosion: On a Journey To Nowhere

imageIn one of the most scathing feature stories on AOL (NYSE: TWX) since the new management came in, FastCompany’s latest issue dissects what led to the current state of chaos at AOL, and then highlights the silver lining in the portal company.

As the story says, AOL has failed to exploit a wealth of formidable assets, including “a ubiquitous brand, millions of regular users, the Web’s dominant instant-messaging service, the iconic MapQuest and Moviefone, the most popular finance site, a top celebrity-gossip site in TMZ, an innovative video search engine in Truveo, and deep television and music offerings.” And why? The story pieces together “a tale of failure on multiple fronts: short-term thinking, bad technology, bungled product development, a dramatic miscalculation of what drives page views on its own site, and a risk-averse culture more prone to imitation than innovation.” Bungled product development is probably the predominant underlying reason, both under this regime and even under the previous one.

It then takes the example of its social networking development efforts with AIM Pages, and how that was bungled up (Will AOL’s $850 million buy of Bebo give it another chance? Too early to say). Then AOL’s search tweaks in 2007, which led to a dramatic drop in revenues from Q2 to Q3 last year. Some silver lining about AOL’s Platform-A ad unit, though of course the management changes over the last 6 months would do little to inspire confidence.

Meanwhile, the author’s note at the end of the story is kinda ironic: “David Case is a freelance writer in New York. He is not related to AOL founder Steve Case.”