No! No! Not HuffPo!

Here we go again.

AOL acquired Time Warner (TW) in 2000 and was finally tossed out by TW at the end of 2009. This separation came way too late.

During those almost ten years of careful work AOL management produced about a $100B loss in shareholder value. One of the monuments to this foolishness is shown at the right.

AOL has been on the loose for a while now and are at it again with their recent announcement of a take over of The Huffington Post.

HuffPo is a blog, but not like this one. It is a collection of many blogs that people actually read. It generates revenue, also unlike this one.

Arianna Huffington and her partners Kenneth Lerer and Jonah Perriti turned the idea of blogging into a pretty good business with current revenues “somewhere north of $50M.” While I don’t often align with their content ideologically, I sure admire how they built the darn thing up.

AOL had around twenty-six million subscribers at the time of the takeover of TW. They grew to around thirty million and have declined ever since to today’s ten million subscribers. If you used AOL in the late eighties (I did), you were truly cool (I wasn’t). You had an email address which most folks did not have at that time and you could do things “online”.

At the time of the TW takeover in 2000 the Internet had been around as a commercial entity since 1995. The world wide web (WWW), websites, and browsers, the software that lets you see those websites, had been around since 1990. The Internet really began to take off in 1993 with the introduction of a nifty browser called Mosaic which turned into Netscape.

It was pretty easy to see that these browsers and the concept of the world wide web would dominate information collection and dissemination rather than access through a proprietary approach like that employed by AOL. In addition, the AOL business model required subscribers. In other words, you had to pay to see stuff. Not so on the WWW.

AOL was not a content company and acquiring TW would make them one but why would TW content want to be put behind a subscriber toll gate?

At the time, the whole deal stunk to me.

Then came the email story.

Most large company Chief Information Officers try to limit the number of software packages they used for email and other desktop (PC) applications. In bigger companies this usually means that these folks run both IBM and Microsoft packages. At the time of the merger, CIO’s had spent a lot of money and created gateways between the two software suppliers and all was well.

TW, not atypical, had both IBM and Microsoft packages delivering eMail services and other, integrated applications like calendars, spreadsheets, and word processing.

The AOL executives now running the combined AOL/TW decided that the TW folks should use AOL email, “You’ve got mail!” They said, that it didn’t look good when their own company did not use the eMail package that they sold their subscribers.

In spite of a great hue and cry from TW IT executives, it was done. The lack of integration with the rest of the TW desktop applications wreaked havoc (which all of the TW IT execs had predicted) with productivity. About nine months later the decision was reversed and TW went back to their IBM and Microsoft eMail software. I never saw any cost numbers but you can only imagine…

Why? Arrogance? Just plain foolishness driven by “we are the boss now” attitudes? We know better because we are the “tech” folks? Who knows. It was a sign to me though, that AOL would not have the maturity to do any of the synergistic changes promised pre merger.

Now, HuffPo.

Well, Arianna and her pals have cashed in with huge returns on their initial investments. The $315 million price tag is a large multiple of that revenue which is “just north of $50M”.

Arianna is now the president and editor in chief of the Huffington Post Media Group within AOL.

It makes me think of another media merger, Westinghouse and CBS. It was not long before there was no Westinghouse anymore. After divesting all of the Westinghouse stuff they then called the company CBS, again.

Maybe Arianna can sell off the other bits of AOL and get back to being HuffPo again only with the strong capital base that the proceeds would give her. Maybe the free wheeling culture of HuffPo will not match with the now mahchure AOL team and the whole thing will start to drop shareholder value again.

All in all, apart from from a few folks cashing in, I see no good here. Run, don’t walk, to higher ground.

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