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Armstrong: All Parts of AOL Have To Beat The Internet; Bebo Struggles

AOL (NYSE: AOL) CEO Tim Armstrong began his fireside chat at day two of Techcrunch’s Disrupt conference by talking about the extensive review of the company’s operations. All operations, whether it was how long the legal department would strike agreements or how long it would take to bill customers would have to “beat the internet.” In other words, sluggishness wouldn’t be tolerated. When it comes to beating the internet in content, things are a lot more tricky, but Armstrong, in a conversation with Techcrunch head Michael Arrington, said that they were getting close to ironing out some of those issues, such as Bebo. He also sought to explain why, unlike AOL’s competitors, Armstrong is not pursuing a “content farm” model.

Following Armstrong’s overview of AOL’s business, Arrington got to the point: is AOL a content company? Or is it a dial-up provider with some content? Armstrong conceded that the dial-up service still provides much of the cash — about $100 million annually, even as it declines 30 percent a year. “The access business through off a lot of cash and gave the company the chance to do a a lot of things over the past few years,” Armstrong said. “We’ve been trying to separate that out and get the other parts to be self-sustaining.”

Then, when the question turned to social net Bebo, which Arrington helpfully reminded the audience that AOL had paid $850 million for it. That was before Armstrong’s tenure and that was a point he was quick to make. “I wasn’t at the company when we bought Bebo and I don’t know if I would have supported that decision,” Armstrong said. “With the benefit of hindsight, no, of course not. But maybe at the time, you could see how the company thought they had good reasons for buying it. When I got here, Bebo was a major distraction. The execution was poor. But after looking at the due diligence, it would have been very hard to make it work. For the past year, we’ve had engineers only working on it.”

Arrington and Armstrong then had a playful exchange over the subject of Bebo, as he prodded the AOL head to admit the decision has been made to shut the social net down. “I’ve heard you’re shutting it down, but you can’t say anything because of weird tax reasons,” Arrington said. Armstrong answered, with a smile, “We’re not through the process yet. But if you know, I certainly don’t.”

The conversation then returned to the subject of content production. Although Yahoo’s acquisition of freelance aggregator Associated Content wasn’t cited specifically, Arrington asked Armstrong if he’s in the content farm business.

“First off, we see content as a way to fund our properties and others who we partner with,” Armstrong answered. “To do that, we’re focusing on quality. I don’t believe what we’re doing is negative and I think ‘content farm’ is a negative term. A lot of the content we’re creating fits in a lot of different buckets. Some of it does have commercial viability, some doesn’t. I hear our competitors only talking about commercial content. We have 500 full-time journalists and 3,500 part-timers. I think our model will work. Content isn’t a zero sum game: it can be great for us and for our partners. The content engines we’re building should enhance our properties’ qualities, as well as others.”

Asked about Carol Bartz’s comment that AOL was a “mini-Yahoo,” Armstrong said he doesn’t know what she was referring to, but if she meant the company has a tighter, more concise strategy, then he’ll take the compliment.