AOL
AOLseemed to be finding some necessary stability under T. Armstrong.
The velocity of Tim Armstrong’s brainstorms can pose challenges.
Some of this can be attributed to the situation AOL finds itself in — undergoing a turnaround attempt mostly unmatched in the internet age. Investors will be watching its progress toward that goal when AOL’s fourth-quarter earnings are released this week. But on the other side of it is Mr. Armstrong, who moves at a pace all his own and who hasn’t been afraid to mix things up.
Change agents, of course, are put in place to do just that. But despite all the change he’s stirred, four years after Mr. Armstrong was poached from Google to spin off the “You’ve Got Mail” business from Time Warner and run it as a separate entity, AOL’s path to growth is still unclear. The number of people who visit AOL properties has not increased in the past three years, and ad revenue, while mostly steady, has yet to show sustained growth. His two biggest financial bets — local-news network Patch and the Huffington Post and its live-video network HuffPost Live — have yet to contribute significant benefits to the topline.
The bright spot of late is the company’s stock price, which rose 96% in 2012. A $1.1 billion sale of AOL patents as well as a large buyback of shares were big reasons for the bump. AOL’s stock as of Feb. 5 is up 30% since it opened at $23.39 on Dec. 10, 2009, the day AOL shares were made widely available to the public. However, that doesn’t include the $500 million or $5.15 per share returned to shareholders in a one-time dividend in December 2012. Including that dividend, total return from Dec. 9, 2009, to Feb. 5, 2013, was 52%, which beats the S&P 500 Total Return index, which gained 46% in the same period. Most Wall Street analysts have either a “buy” or a “hold” on AOL and the board last year extended Mr. Armstrong’s contract through 2016.
But as Mr. Armstrong approaches his fourth anniversary next month, his work is cut out for him. Year-over-year revenue was flat in the third quarter of 2012 for the first time in his tenure, and Wall Street is expecting 2013 to be when AOL returns to growth.
Wooing advertisers
It won’t be easy. AOL, which Mr. Armstrong reimagined as a media company post-spinoff, registered 110.8 million visitors to its properties in December 2009, his first year there. Since then, it’s added Huffington Post and TechCrunch, but traffic remains relatively flat in comparison with four years ago; AOL properties notched 110.1 million unique visitors in December, according to ComScore.
“I’m the first one to say that flat traffic is not a win,” Mr. Armstrong said last week in an interview at AOL headquarters. “But at AOL right now, it happens to be a win.” His argument is that he inherited assets in steep decline — among them, the email and Mapquest products — and managed to keep traffic steady in spite of them. Growth, he said, is on the horizon.
The company’s core revenue driver of selling advertising on those properties is steady, if uninspired. Ad revenue in the third quarter of 2012 was $340 million, off 15% from the third quarter of 2009, when the company still operated within Time Warner, but up 16% compared with the third quarter of 2010, when AOL was a standalone company.
Despite mixed results thus far, Mr. Armstrong is in good standing, both with the ad-buying community and Wall Street, surviving a distracting battle with an activist investor and — despite some bumps along the way — creating a setup in which he and another strong personality, Arianna Huffington, can coexist.
A salesman by nature, he can woo advertisers and close deals with the best of them. He has charisma that can rally the AOL troops around returning one of the greatest brands in internet history to prominence. And people generally like him — partly because he is fun to be around and partly because of a do-good nature that manifests itself in charitable initiatives, which he pushes his company to partake in as well. “He probably has the best heart of any human being in this business,” a former employee who reported to him said.
But the circumstances around the dismissal of the company’s briefly employed CMO Jolie Hunt in December provide a glimpse into another side of Mr. Armstrong. In interviews with more than a half-dozen former execs, a portrait emerges of a passionate executive who can be demanding and exhausting to work for.
In the case of Ms. Hunt’s departure, Mr. Armstrong originally said that AOL was decentralizing the marketing department, thus making an overall CMO role unnecessary. The company has followed through on that initiative, but it wasn’t the whole story. People familiar with the situation later told Ad Age that disagreements between Ms. Hunt and Mr. Armstrong over the creative direction of an AOL TV campaign contributed to her exit after Mr. Armstrong became intimately involved in its direction. In last week’s interview the CEO conceded as much, recounting what he told employees involved in the project.
I’m going to ask you guys to do something you’ve never done before. It’s not going to fit into anything you worked on before,'” he said. “”It’s going to feel tension-filled and I’m going to be on top of it. So if you think this is a normal ad campaign that’s going to get done the normal way, this is not going to be the normal process.’ I gave that speech many times up front. And I followed through on it.”
Some point to examples like this as proof of a CEO who believes he can do most everyone’s job — sometimes better than they can. Those who’ve worked for Mr. Armstrong, including those who have left AOL on their own and those who have been asked to leave, say he’s known to bombard his executive teams with ideas, prompting one industry exec who knows Mr. Armstrong well to proclaim: “Tim is the king of cocktail-napkin ideas.”
“He has a great combination of left- and right-brain thinking,” another former employee who reported to him said. “But sometimes that right brain can get a little crazy.”
In the case of the TV commercial, Mr. Armstrong wanted to incorporate dancers and have the spot take cues from the 1990s rap hit “Mo Money Mo Problems.” He also wanted to find every married couple that met via an AOL chatroom. Separately, Mr. Armstrong has been known to spend time dreaming up ideas for gifts for ad agencies and their execs, some of which he’s been talked out of, and some that he has not. Among them have been gumball machines, motorized scooters and AOL-branded tracksuits.
The enthusiasm and velocity of his brainstorms presented a quandary for some reporting to him. Just because Mr. Armstrong says something doesn’t actually mean he wants it to happen. Do you make sure you have the budget for it or just go full-speed ahead? Do you let him sleep on it or follow through right away?
“We had a three-strike rule with Tim,” said another former AOL executive. “He had to ask you three times before you did it.”
Mr. Armstrong does not shy away from these observations about his freewheeling and sometimes erratic creative spirit, though the pained look on his face listening to the feedback suggests he is hurt by some of it. He admits he finds creative inspiration all over. He talks about visiting a Nike store in Washington D.C.’s Georgetown neighborhood, snapping 100 photos to bring back to show the company’s product team. In his early days at AOL, he says, he planted a bunch of Kidrobot figurines, which stand about two-and-a-half-feet tall by the looks of the one that still stands in his conference room, in random spots around the company’s New York office to let employees know it was OK to have fun again.
“I’m used to being in creative environments where people throw out a lot of ideas,” he said. “Sometimes people struggle with the [speed of the] idea generation. But if you compare it to some of the other places I’ve worked, it wouldn’t be an unusual day. But I understand that feedback.”
True Calling
Former executives understood his heavy involvement in sales and marketing. But many were surprised to find a CEO knee-deep in product launches. He presided over the AOL.com home-page redesign in 2010, leading some who worked on it to feel they didn’t have a real say. But Mr. Armstrong, despite the acclaim he’s received for creating and scaling Google’s sales operation, believes his true calling is not in fact in sales.
“The reality is, I’ve started multiple companies, so actually I’m probably more of a product/creative person than I am sales,” he said. “Although I can do both.”