Google Executive Takes Over AOL

Outgoing Management Team Lasted Just Two Years

By Frank Ahrens, Mike Musgrove

Friday, March 13, 2009

AOL is getting new leadership again, just two years after the outgoing executives were chosen to turn around the struggling dial-up and content company.

Google Senior Vice President Tim Armstrong will take over as chairman and chief executive, replacing Randy Falco, said Time Warner, AOL's parent company. Ron Grant, AOL's president and chief operating officer, will leave with Falco after a transitional period of a few weeks.

"Tim is the right executive to move AOL into the next phase of its evolution," Time Warner chief executive Jeffrey Bewkes said in a statement. "At Google, Armstrong helped build one of the most successful media teams in the history of the Internet -- helping to make Google the most popular online search advertising platform in the world for direct and brand marketers."

AOL has blamed falling ad revenue for its declining fortunes; its annual revenue fell 20 percent in 2008, to $4.2 billion. Falco's ouster comes as the company is in the midst of a round of layoffs in which it expects to shed about 10 percent of its workforce, or 700 workers. Falco announced the layoffs in a memo distributed to AOL employees in January.

Armstrong will be responsible for the future form of AOL -- and who owns it. A spin-off of some or all of AOL's parts is likely in the future, said a source who spoke on the condition of anonymity because a personnel matter was being discussed.

"If there's any company that understands the market AOL should be in, it's Google," said Roger Kay, president of Endpoint Technologies Associates.

Armstrong has led Google's advertising teams in North America and Latin America. "This guy has the perfect resume . . . I'm sure Google is perturbed at the prospect of him working for somebody else," Kay said.

Some tech industry pundits were not as optimistic on whether AOL's outlook would improve with a change of executives, however.

"When you get somebody from Google like this, it usually means that you're paying them a ton of money and you're hoping for a miracle," said Rob Enderle, a tech industry forecaster. "I'm not sure AOL's problem is something that you can fix with a body."

AOL, Google, Yahoo, Microsoft and News Corp. have been engaged in on-again, off-again discussions of varying degree over the past two years, many of which have focused on AOL's advertising business, where it would make the best fit and how much it's worth.

As for AOL's incoming chief executive, "it's hard to say at this point what he'll do," said tech pundit Tim Bajarin. "AOL has had so many ups and downs. Google understands vision and direction. That can only be a plus for AOL."

Falco joined AOL in 2006 after 30 years as an executive at NBC. At AOL, he took over an online business that was attempting to move away from its DNA -- dial-up Internet access -- and toward an online ad-serving model, aiming to compete with next-generation media products, such as Google.

In the months after he was hired, Falco purchased several advertising-related companies and moved AOL's headquarters from its long-time location in Dulles to Manhattan -- the heart of the U.S. advertising market.

He also executed waves of layoffs to cut costs as AOL has lost cash. He laid off 450 employees one month after he took over and 2,000 more in October 2007. On Tuesday, another round of cuts hit AOL. The company plans to have reduced its workforce by 10 percent, or 700 jobs, at the end of this round.

Tagged: AOL, business

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