Category Archives: AOL

Yahoo’s Bartz Should Stop the Blame Game

I’m just not seeing how Carol Bartz and her executive team have set Yahoo on a bold strategic course that breaks with the past and takes the company into a bright future.

Not everything in Michael Arrington’s denunciation of Yahoo under Bartz is on target, but his criticisms put lots of checks in the right boxes. Like Arrington, I haven’t seen anything strikingly new from Yahoo since Bartz’ ascension. If anything, the company seems to be practicing the risky alchemy of addition by subtraction: abandoning search in exchange for Microsoft advertising lucre, slashing staff, dumping properties that don’t readily fit the consumer-portal mold.

It’s true that Yahoo was unfocused, and that it needed a narrower, sharper mandate.

What’s more, some of those expenditure reductions and were necessary, especially in a harsh downturn that has taken a jagged bite out of advertising revenue. That said, costs reductions only take a company so far. They help burnish an embattled bottom line, but they do nothing to grow the business.

Ultimately, Bartz’s challenge is to grow Yahoo’s business, to boost the top line. Does she have a coherent strategic plan to get it done? At this point, I’m not seeing it.

Under Bartz, Yahoo is precisely what it was before – a web portal for consumers – but without search. She admits that Yahoo’s natural competitor, the rival that looks more like Yahoo than any other company out there, is AOL. That’s true, but it can’t be comforting news for Yahoo’s stakeholders. AOL, after all, is another portal company looking to redefine itself, squeezed on one side by search and on the other by social networking.

Bartz needs to explain what Yahoo will do that will make it different, make it unique, separate it from the pack. She needs to articulate how it will continue to drive consumers to its virtual front doors and attract the advertising revenue that follows them.

At the same time, she has to stop attacking forces she cannot control and that, frankly, do not control her. Why does she waste so much time berating press and pundits? Every time she does it, I wince. It’s a waste of energy, a waste of time; and time, as the hackneyed adage goes, is money.

The fact is, Bartz will always have critics, Yahoo will always have critics. Then again, every CEO and every company has its critics. CEOs must have thick skin. They have to be able to withstand external criticisms, to be driven by the courage of their convictions and the certitude that they’re blazing the right trail. Bartz needs to stop trying to deflect blame for Yahoo’s struggles toward its external detractors. The critics beyond Yahoo’s walls don’t control the fate of the company. She does.

Something else she needs to stop doing is blaming the past regime for the Yahoo problems she hasn’t imputed to the media. There’s no upside to continuing a jeremiad against a defunct regime. She should be looking forward, not backward. Jerry Yang and his lieutenants might have bequeathed problems to Bartz and her team, but that’s why they’re there – to solve those problems. The new team has been brought aboard to boldly and confidently chart a new course, not to endlessly bemoan the baggage they’ve inherited.

Besides being pointless, her excoriations of the past regime are culturally poisonous. In attacking Yang and the Yahoo of old, she implicitly assails those Yahoo managers and employees who were left behind and remain with the company. Rather than rallying the troops under all-encompassing banner, she risks instigating an us-against-them dynamic, whereby the new members of the company are arrayed against the holdovers.

I’ve seen this dynamic play it out in a few companies, and the results are rarely salutary. The new additions, taking their cues from a new leader who is disdainful of the former executive leadership, suppose that the vast majority of those who preceded them at the company – including the teams they’re now managing – are part of a problem rather than potential allies in a solution. The new team often treats the veterans with barely concealed condescension. At the same time, the long-time employees resent the arrogance and superiority of their new bosses. Understandably, they begin to feel that their new leaders aren’t interested in their ideas and opinions.

Bartz likes to attack the “cynicism” of her media detractors. She should consult a dictionary because he’s not using the right word. Her critics are skeptical, not cynical. Given what she’s shown us heretofore, skepticism seems the proper stance.

Garlinghouse’s New Employer Resembles Former Corporate Home

Brad Garlinghouse, former Yahoo senior vice president and author of the “Peanut Butter Manifesto,” has taken a job at AOL.

He will serve as president of Internet and mobile communications at AOL. As the New York Times explains, Garlinghouse also will head AOL’s Silicon Valley operations, which will be expanded, and lead the West Coast arm of AOL Ventures, a unit in charge of investing in start-ups and spinning off businesses.

It’s a bigger remit than the one he owned at Yahoo, but the two companies are similar in many respects. His role at AOL covers some of the same operational ground he oversaw at Yahoo.

In his Peanut Butter Manifesto, which was leaked to the Wall Street Journal back in late 2006 and was circulated widely inside and outside Yahoo, Garlinghouse argued that his former company was spread too broadly and not sufficiently focused to achieve meaningful business success. There was truth to that argument, and much else that Garlinghouse had to say about the dysfunction and institutional paralysis within his former employer.

Now, though, he’s joining another Internet portal. When one looks at AOL, whether at its front door (www.aol.com) or at any of the properties that lie behind it, one sees a company that is similar in many respects to Yahoo. If one were compelled to identify a primary competitor to AOL, or a company that AOL most resembles, Yahoo would be at the top of the list.

Focus will be essential to AOL’s success. It needs to select areas where it can win, against Yahoo and against others, and then execute effectively and precisely. Despite the changes at Yahoo since he left, Garlinghouse knows his former companies strengths and weaknesses and presumably is uniquely qualified to position his new company for competitive advantage against his former employer.

Having performed admirably and candidly as internal critic and corporate dissident at Yahoo, Garlinghouse now finds himself in a role where he will be given a full opportunity to put his ideas into practice.

That won’t be easy. AOL’s parent, Time Warner, has grown impatient, and it would like to divest itself of its Internet sibling at the earliest possible opportunity. AOL is a brand that has been in chronic decline, losing market share steadily. It has a few properties that are performing well, it has been given a new strategic mandate, but it still appears to be a hodgepodge of services rather than a coherent whole.

Still, Garlinghouse must have relished the opportunity to do at AOL what he believes should have been done at Yahoo. Apparently he passed on other job offers to set up shop at AOL West.

Yahoo on Verge of Major Acquisition?

I am hearing that Yahoo is on the verge of announcing a major acquisition.

The Wall Street Journal reported last month that Yahoo had acquisition talks with social-networking site Facebook, but it appeared those negotiations had reached an impasse. Reportedly, Facebook’s asking price was $1 billion. It’s also possible that Yahoo might acquire CNET, which has a market capitalization of $1.26 billion.

It is also possible, though less likely, that Yahoo might wish to acquire Dow Jones & Company or Time Warner’s AOL group. There are countless other possibilities, too, but it certainly seems that Yahoo is about to make an acquisitive move that many market watchers believe is long overdue.

AOL Made Bid for YouTube, Says Advertising-Driven Business Model Working

AOL’s chairman and chief executive officer said yesterday his company wanted to acquire YouTube Inc., but that Google Inc. was the only player in a position to put together the $1.65-billion all-stock offer that sealed the deal.

Said Jonathan Miller, speaking at the Web 2.0 Summit:

Anybody [in the Internet space] who wasn’t interested in YouTube was either asleep or not being honest.

Notwithstanding AOL’s inability to land YouTube, Miller reported that his company is making a relatively smooth transition to its advertising-driven business model from its previous paid subscription-based model. He said the company’s growth in advertising revenue has exceeded the industry’s pace of advertising-revenue growth in recent quarters.

Miller also reported that the company learned quite a bit from its unfortunate privacy scandal, which surfaced this past August when the company posted about 20 million search records from about 658,000 of its members on one of its research-oriented sites.

AOL apologized and scrubbed the customer-search data from its research website, but by then it had been downloaded and reposted on multiple Internet sites. The search records contained sensitive information, such as credit card, telephone, and Social Security numbers, as well as birth dates, full names, and personal addresses.

Miller declined to comment when asked if parent company Time Warner Inc. would consider selling or spinning off AOL. In a previous interview, which Miller since has disavowed, he was quoted as saying that Time Warner might be willing to engage in a discussion about a possible sale or spinoff of AOL.

Speculation persists that Time Warner is considering selling or otherwise divesting AOL in whole or in part, but the consensus view is that the parent company will wait until AOL is further along in its turnaround before taking action.

Building on Industry-Wide Trend, Yahoo Integrates IM with Web-based Email

In another example of how online applications are becoming richer and more useful, Yahoo announced today that it will embed instant messaging into its web-based email program within the next few months, allowing  users to partake in live chats from Yahoo Mail and to obviate the need for installation of a desktop IM application.

As reported by CNET’s News.com:

With the new feature, users will be able to see if their contacts are logged on to Yahoo Mail and easily chat with them. They will also be able to see the online status of contacts who have Yahoo Instant Messenger, chatting with them as well. Eventually, they will be able to chat with MSN Messenger users too. Yahoo and Microsoft made their instant-messaging applications interoperable in July.

The auto-complete function in Yahoo Mail will indicate if a contact is online, and starting a chat will be as simple as clicking once, Yahoo said. Users will also be able to easily send a copy of chat sessions to people in an e-mail and to copy e-mails into chat windows.

Garlinghouse told CNET that the new embedded-IM feature will be introduced to Yahoo Mail users in the next couple of months. Today Yahoo Mail users receive presence indications as to when their Yahoo Messenger contacts are online, but they must have IM clients installed on their PCs if they wish to initiate IM discussions.

While neither AOL nor Microsoft has integrated chat into their online email programs, Google offers IM integration in its web-based Gmail messaging service. According to Rafe Needleman of CNET’s Webware, however, the degree of IM integration provided by Yahoo goes beyond what Google delivers:

In the new version of the Yahoo Mail beta, which will roll out "in a few months," you can start to compose an e-mail just as you always would, but if the recipient of your e-mail is online (on Yahoo IM, MSN IM, or on Yahoo Mail), you’ll be able to exchange your e-mail composition window for a chat window. Or, of the recipient comes online while you are writing an e-mail, you’ll get an alert, and will be able to invite them to chat. When you do, the e-mail you’ve been writing will get copied into the chat window. Likewise, if you’re chatting and they drop offline, the transcript will get copied into the window as it changes from chat to e-mail.

This integration should make it very easy to maneuver between the two communication types, and it will also help people new to IM to get with the program. It doesn’t require a downloaded IM client; directly from the Yahoo E-mail web page, you’ll be able to chat with anyone.

As Needleman suggests, the next step for Yahoo and Google, as well as the others, is to add voice and video conversations and conferencing to the mix. It seems inevitable that all the major players will offer integrated online unified communications.

A continuing problem, as I’ve noted here before, is the lack of support for the SIP signaling and session-management protocol standards, as well as for IM and presence protocols such as XMPP and SIMPLE.

Although we will see compelling unified-communications services online, they’ll be disparate islands or silos of communication. Side deals, such as the one between Microsoft and Yahoo, will provide degrees of interoperability, but we’re a long way from an open, standards-based approach, such as the one that gave us the SMTP protocol and the seamless communications ubiquity of email.

AOL CEO Says IPO “An Option”

In an interview with German newspaper Die Welt, as reported by Reuters, AOL CEO Jonathan Miller said an IPO for AOL was "an option" under consideration.

He also told the German newspaper AOL’s sales might decline for up to two years as it moves from a subscription-based business model to an advertising-driven model.

In the wake of Google’s $1.65-billion stock-for-stock acquisition of YouTube, AOL will be buyer in the Web 2.0 consolidation push. Miller said AOL was considering various companies as acquisition candidates, including some in Europe.

Miller said AOL had talks with social-networking site Facebook, but had decided not to bid for it. In the interview, Miller implied that Facebook’s asking price was above what AOL was willing to pay.

Said Miller:

In the end, it’s a question of price. One consequence of Google’s acquisition of YouTube is that no one wants to sell under the price they think they can get. The game is becoming ever more expensive.

AOL Subscribers Meet Frustration in Switching to Free Services

AOL subscribers looking to switch from paid subscriptions to free services have been frustrated by AOL’s demand that they call a toll-free number to make the change rather than to do it online.

According to an article (yes, subscription required) in the Wall Street Journal, online tonight but to be published in tomorrow’s edition of the financial daily, AOL hasn’t made switching to free services as straightforward as many subscribers would prefer.

Instead of having the option of making the change online, subscribers must phone a toll-free number and navigate a number of phone-system decision trees before finally getting an opportunity to speak to a live person. At that point, they are asked if they are sure they want to make the change, and are given a couple paid-services pitches for good measure. Only then does the subscriber go from being a paid user to a free user of AOL’s services.

AOL claims it’s all being done in the best interests of subscribers, many of whom, according to AOL, don’t understand the ramifications of the decision to switch from the paid services, which include dial-up access, to the free services that are available to any Internet users interested in partaking of them. AOL says many of these subscribers might not have an Internet-access alternative at hand, and that they need to understand that the move to free services does not include Internet access.

That might be true, but the last thing AOL needs in light of recent events, particularly the raging controversy over its public release of subscriber search data, is another public-relations setback. Despite AOL’s protestations to the contrary, it appears the company didn’t prepare adequately for its subscribers to make the change to free services.

Nobody is saying the logistics behind such changes are easy or simple, but AOL owed it to itself and to its customers to get this transition right. It seems to have failed the test, at least part, and it did so at a time when it could least afford the blunder.

AOL Offers Free Anti-Virus Software, but Who Will Use It Now?

AOL is making news today, there’s no question about it. Unfortunately, most of the news has been extremely bad, headlined by its public release of log data relating to Internet searches made by its subscribers.

The company is falling over itself to apologize for what most observers classify as a major privacy transgression, but the damage has been done. AOL’s integrity and trustworthiness have taken serious hits, and it remains to be seen whether the company can do anything to atone for such a serious error in judgment. AOL is in a full-scale damage-control mode, but who can it contain or control damage that already has been done on a massive scale?

Anyway, on the same day as the news about the company’s disclosure of subscriber search logs, putatively in the interests of academic research into search patterns, AOL was attempting to make news on a different front. That news has been completely overshadowed by the controversy over the search data, and rightly so, but I still want to mention the other bit of news AOL made today because I think it might have been a successful foray for the company if it had occurred under more favorable circumstances.

AOL introduced free Windows-based antivirus software today, and made it available to anybody who wants it, not just to AOL subscribers, whose numbers are thinning faster than those of some endangered species. Called Active Virus Shield, the software offers basic protection against viruses, spyware and other malicious software, according to AOL. It is being delivered in partnership with Kaspersky Lab,  a well-respected (as AV vendors go) Russian developer of antivirus, antispyware, and firewall software.

Other free antivirus software is available to Internet users, including offerings such as Grisoft’s AVG Anti-Virus and ClamWin, based on the open-source Clam AntiVirus engine. Still, there’s no doubt in my mind that Active Virus Shield would have become the most popular free antivirus software on the market. It might still achieve that status, but the road got rockier and much steeper in the aftermath of today’s devastating backlash regarding the release of subscriber-search data.

The problem is, AOL’s free antivirus software comes with conditions. Active Virus Shield users must agree to allow AOL and its partners to deliver ads to them. Furthermore, Active Virus Shield collects a wide range of data from users’ personal computers that might be used for marketing purposes. The information collected by the software includes an email address, which is required to download and install it, plus usage stats, data regarding ad responses, and details relating to users’ personal computers.

After today’s controversy, is anybody going to trust AOL with his or her personal information? Actually, some people will do it (never underestimate the power of free stuff), but the numbers won’t be nearly as impressive as they might have been if AOL had taken better custodial care of the subscriber search data now circulating on mirrored websites across the Internet.

Symantec, McAfee, Microsoft, and Trend Micro might have been feeling more pressure today if not for AOL’s latest exercise in self-destructive behavior. As it stands, they should have a relatively easy time scaring users away from AOL-branded antivirus software, irrespective of whether it’s offered at no charge.

Meanwhile, Kaspersky probably is cursing its fate, having allied itself with a company that can only shoot straight when it’s aiming at itself. This could have turned out so much better for AOL and Kaspersky. Instead, they both have nobody to blame but AOL.

AOL Exposes Personal Search Data, Shoots Itself in Process

As reported by InfoWorld, among copious others, AOL has raised serious privacy concerns by releasing the details of Internet searches performed during a three-month period by hundreds of thousands of its subscribers.

Ostensibly made available for research purposes, the data no longer resides where AOL initially posted it (http://research.aol.com), but it has been cached by Google’s search engine and mirrored at several other sites. A cached copy of the page said the data comprised about 19 million searches performed by 658,000 users from March through May.

Earlier this year, controversy ensued when the Department of Justice (DoJ) requested access to search data from AOL, Microsoft, Yahoo, and Google, with the latter resisting the government’s data grab on privacy grounds. AOL was among those that acquiesced to the government’s request, and now it has decided to go one giant step further by publicly disclosing search data that is more detailed, personal, and revealing than anything previously in the government hands.

Notable bloggers are in an uproar, with TechCrunch, Techdirt, Paul Kedrosky and scores of other weighing in with near-unanimous condemnation of AOL.

At the very least, this debacle represents a public-relations nightmare for AOL. The company has begun apologizing profusely for what it calls a mistake and a misunderstanding, but that’s probably not nearly enough expiation for this particular sin. I wouldn’t be surprised to see AOL users desert the company’s services in ever-greater numbers now, as they have been provided with yet another compelling reason to abandon a badly listing ship.

Is Video AOL’s Comeback Chance?

Fortune magazine, which (like AOL) is owned by Time Warner, has published a piece looking at whether AOL has a serious chance of getting back into the game for online consumer patronage and advertising revenue.

It’s a candid article, looking at the strategic shifts and wrong turns AOL has taken over the past four years. It takes the reader right up to last week’s decision by AOL to offer the vast majority of its online services and software at no charge, effectively de-emphasizing its questionable reliance on a dwindling base of paying dial-up subscribers.

The verdict seems to be that AOL finally has made a right move, but likely has made it far too late. It must do a lot more to close ground against Google, Yahoo, and MSN, as well as against newcomers MySpace (owned by News Corp.) and YouTube. Offering more free storage than Google and providing personalized email addresses probably won’t be enough to persuade consumers to switch sides; nor will be enough for advertisers to reallocate their promotional expenditures.

At the end of the article, the great hope for AOL is alleged to be its video portal, which was given an overhaul last week. I realize a case can be made that AOL is uniquely positioned to capitalize on the burgeoning popularity of online video, but a similar “synergistic” argument was made when AOL merged with Time Warner back in the twilight of the Internet boom. We all know how that turned out.

Even in video, where AOL is said to possess unique assets that should confer competitive advantage, it’s going up against strong competition, not only Google, Yahoo, and Microsoft, but a slew of startups, led by YouTube.

At least, when it comes to online video, AOL is not as far behind as it is in the other online services, such as email, news, and social networking. Then again, AOL has not demonstrated a proclivity to lead through innovation. Traditionally, it has followed the lead of others rather than blazing its own creative trail. That will have to change, even in video services, if AOL is to remake itself into anything more than a fading icon of the Internet’s initial era of surging growth.

AOL’s Strategic Shift Forces Restructuring

More than one quarter of AOL’s worldwide wokforce, or about 5,000 employees, will be cut from the payroll as the online company recreates itself as an advertising-based font of free content rather than a subscription-based provider of Internet access and for-fee proprietary content and services.

The employees will be shed over the next six months, with the first notices to be delivered in October. As part of restructuring, AOL will attempt to sell its Internet-access businesses in France, Germany, and the UK.

Employees were informed of the impending cuts at a companywide meeting and webcast Thursday, one day after AOL announced its plans to bulldoze its walled garden and to offer its range of online services, including email and various types of content, free of charge.

Given what was announced yesterday, major changes were inevitable at AOL. Priorities have been reordered, and personnel and resources must be reallocated accordingly. Still, the company must be careful to carry out the changes with sensitivity and enlightened self-interest.

This is a major overhaul, and survivors within the company, as well as potential advertisers on AOL’s online services, will be watching closely to see how well the company handles it.

AOL Breaks Down Walled Garden; Is It Too Late?

After providing plenty of preliminary notice that such an announcement was forthcoming, Time Warner’s AOL unit officially announced today that it will make its email, instant messaging, security software, and other services free of charge to anybody with a broadband connection.

It’s a belated attempt by Time Warner to breathe new life into its online advertising business, currently a distant fourth behind Google, Yahoo, and Microsoft’s MSN. Not everybody is convinced that will make an appreciable difference, with many market analysts suggesting that it’s a case of too little, too late.

AOL says it wants to migrate all of its remaining dial-up subscribers broadband Internet connection, and it also wants to drive more broadband traffic to rich multimedia content, such as streaming video, the resides on AOL.com. Interestingly, though, AOL will continue to offer and sell its dial-up access service, but it will no longer market it aggressively.

That seems like a mistake. What AOL ought to do, I believe, is give its installed base of 17.7 million dial-up subscribers — down from 20.8 million a year ago and from 35 million at the pinnacle of its popularity in 2002 — early warning that it will be shuttering its dial-up business within six months. That will give customers plenty of time to find a new access provider, offering either broadband or dial-up services; and it will allow AOL to focus resolutely on drawing broadband traffic to its site to boost ad-generated revenue.

AOL needs focus. It says it will introduce a variety of new products over the coming weeks, including personalized e-mail domains, video-search services (including searches of Google and YouTube video databases as well as its own), and additional security-related services. It will have to keep moving in that direction, providing innovative services the clearly differentiate it from Yahoo, Google, and Microsoft.

I doubt that it can win that battle with the old dial-up business along for the ride.