In a scene from Casino Jack, when a partner complains about a negative story in Newsweek, Kevin Spacey as Jack Abramoff has that week’s Time ready with a different take. The Jan. 24 issue of The New Yorker is a bit like both when it comes to AOL: a six-page spread with a cartoonish illustration of chairman and CEO Tim Armstrong, a word portrait of a charismatic exec in turnaround mode — and a high level of skepticism that the company can survive.
Auletta, who dismisses most of AOL’s content as “piffle,” says “quality is a problem for the entire AOL (NYSE: AOL) empire.” Patch, which Auletta puts at 700 outlets and has 750-plus now, is too much like “digital Yellow Pages” plus has tension between journalism and boosterism — and probably costs too much to last at an estimated $30 million a quarter.
AOL gets points for hiring hundreds of journalists for Patch and hiring some talented journalists overall, but loses some for failing to hire an editor in chief. It also loses some for losing reporters. AOL refugee Jeff Bercovici told Auletta one reason he switched to Forbes.com was to get his calls returned but also cited the pressure to reverse a downward trend. And this was written when FanHouse was an AOL brand; late last week Armstrong announced plans to outsource most of sports, health and real estate. Auletta’s take: AOL does not seem to be saving journalism, and journalism does yet seem to be saving AOL.” He carefully leaves the door ajar for that possibility but clearly doesn’t expect it.
Beyond Patch and algorithm-based Seed, Auletta sees little new in Armstrong’s “content strategy” given that AOL already was relying on the concept of being a “content” company when he came on board. He doubts AOL’s ability to filter or curate in a way that will capture or retain enough users to guarantee AOL’s revenue once its dial-up business is gone. (He also writes that many of those subscribers are older people who don’t know that they don’t need to pay AOL to send e-mail.)
Perhaps the most telling is his suggestion that Armstrong took the job in 2009 with thoughts of a turnaround similar to Steve Jobs at Apple (NSDQ: AAPL) or Louis Gerstner at IBM while his ending about a common path for tech companies trying to come back from near-death may put AOL in very different company: Wang, DEC, Excite and Lycos. “They rise, then they sputter, then they crash.”
Side note: TechCrunch and Engadget are barely mentioned in Auletta’s post but it’s not hard to see the melodrama of the tech step-sibs making a cameo if only the timing were different. The company can’t afford the distraction. Armstrong’s latest pitch is hard enough to get across without being drowned out from inside.