Remember when Tom Hanks and Meg Ryan fell for each other in the film, “You’ve Got Mail”? Time Warner produced the 1998 date flick, which was basically an ad for AOL that coincidentally foreshadowed the love affair which consumed the two companies a couple of years later.
In the 1990’s, AOL represented the Internet to tens of millions of people. Its dial-up service made the Web accessible and easy to use. The company did great marketing and by 2000 had built a huge following. Its stock price rocketed and then, in an act of Internet bad-boy hubris, AOL used its stratospheric valuation to woo and marry Time Warner.
The new media mavens had officially taken over the old media stalwarts. The marriage costapproximately $160 billion, one of the largest acquisitions in history. But the honeymoon did not last long and by the end of 2000, the AOL-Time Warner romance was already on the rocks.
Where do you want to start? Within months of the nuptials, the dot com economy blew up and took nearly ever company’s stock price with it. Executive egos at the merged entity got in the way as old media and new media cultures clashed. Over time, AOL also lost the battle for consumers on the Internet to Yahoo and Google, and more recently, Facebook and Twitter, among others. It seems that almost everything that could go wrong did. So it is that nowadays, the once mighty AOL is barely relevant.
Now it's divorce time with AOL being spun-out of Time Warner to become a stand-alone, public company. The question is whether the newly-single AOL can make its own way as a solo act.
Probably not.
Most turnarounds fail. Regaining lost momentum is hard as time is a thief. And most turnaround management teams lack the Three C's - cojones, craniums, and cash - to make it work. What's more, Time Warner CEO Jeff Bewkes may be planning to saddle AOL with some of Time Warner’s debt and that might stall AOL’s much needed mid-life makeover. So it is that many predict the likely outcome for AOL is a continued slide into the Internet graveyard with the company taking its place alongside that of fallen highflyers like Webvan and Pets.com.
But if fallen Canadian heavy metal band Anvil can stage a comeback with a bold move - they made a heart string tugging, spinal-tapian rock-umentary that is gaining them new fans rapidly - why not AOL also?
OK, so how could AOL thrive as a divorcée? Successful turnarounds need fresh thinking, energy, and experience. Hiring a new CEO is a good first step. In March Tim Armstrong an ad sales exec from Google came over to AOL/>.
Unfortunately, AOL has lost a lot of its best people. Armstrong must immediately fire the dead weight and start promoting the smart, aggressive, risk-taking people. He also needs to go hunting for new top talent to infuse the company with creative ideas, products, and services. Some of this new talent needs to be very young. Bill Gates, Steve Jobs, Michael Dell, and AOL founder Steve Case were all kids when they created their first big innovations. History is repeating itself nowadays with young leaders at the helm at social networking companies such as Facebook, Twitter, and Digg.
Additionally, Armstrong should reach out to Steve Case and ask for advice. Case is a smart guy who did it once and he might be able to help AOL. Making Case an advisor, or potentially an AOL board member, is also an option.
Once Armstrong figures out the internal organizational issues, he needs to push AOL to take big calculated risks. One of the reasons that startups generate so much innovation is because they act like they have nothing to lose. So they go for it. Bigger established companies can become protective, so they tend to play it safe. AOL needs to act like a horny young startup, not an old jilted lover.
To kick-start the process AOL should sell its Internet access business. It may be a major contributor to AOL’s revenue, but it doesn't figure as part of the company's future. AOL lost its battle for the Internet access market a long time ago, when it was slow to adopt broadband services. Get over it. Sell the business. Generate some cash and move forward.
Next AOL needs a major revamp of its services. Its Web sites generally look dated. CEO Armstrong said recently after Time Warner's annual meeting, "We are first and foremost concerned with the consumer experience for AOL."
No wonder. AOL needs to come up with a dramatic breakthrough in design, one that creates a new, easy to use Web browsing experience. Apple killed the competition in the MP3 player market by creating a whole new paradigm for buying and listing to digital music with the iPod. YouTube did the same in Internet vidoe by using Abobe’s Flash to create a new way to publish and consume video on line. AOL needs to do the same for the way we experience Internet content.
Next, AOL should become more than a portal or search engine. It needs to aggregate everything you and I use on the Web into one central place. The truth is that the Web is still too hard to use and it takes too long. If they were able to become a personalized, uber-portal that manages everything we do on the Web in one simple front-end, new users would flock to them. It appears that Google may be taking a stab at this with its new Wave communication offering. Creating a new user experience needs to be done in the context of the social computing revolution. AOL must find a way to combine social networking, user-generated content, email/messaging and traditional media content so that we are compelled to use their services.
“AOL needs to act like a horny young startup, not an old jilted lover.”
- Christopher Lochhead
Additionally, it's time to go shopping for some cool new companies. Today in Silicon Valley - and beyond - there are hundreds of small startups that are trying to make the Web user experience better. AOL should buy several and accelerate its ability to create the next generation user experience. With the explosion of mobile devices like the Blackberry and iPhone AOL must figure out how to become one of the top 10 mobile services on smart phones. So buying some mobile companies would also be prudent.
Additionally, AOL also needs to forge strong partnerships. They should attach their brand to Apple’s ASAP. Apple, not Microsoft or Sony is defining the future of user experience for technology consumers. It should also explore content distribution deals with some of Time Warner’s competitors.
After all that, AOL lastly needs to launch an aggressive marketing campaign to gain new users. It must also make us care about AOL again. And try their new services. In the old days AOL bombarded the public with zillions of startup CDs to get people to try the service. The CDs were so ubiquitous people called them AOL coffee cup coasters. Now it's up to management to figure out how to blanket the world again and to get us to try AOL 2.0.
As I noted earlier, fixing a broken company is one of the hardest tasks in business. But if AOL can pull this feat off, anything is possible. At that point, maybe there's a chance Tom Hanks and Meg Ryan might even do a sequel.
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