Following its recent megadeal to acquire The Huffington Post for $315 million, AOL wants to get smaller and more editorially focused.
That focus is driven by the need for profitability and improved quality, according to chairman and CEO Tim Armstrong, who sat for a keynote interview on Thursday (March 10) at the Bloomberg 2011 Media Summit in New York.
During the hour-plus interview, Armstrong confirmed the company’s new round of layoffs, saying, “Today is a very difficult day at the company.” But Armstrong mostly struck an optimistic, almost defiant tone during the sit-down, predicting that AOL would start to exhibit the same double-digit ad revenue increases the rest of the online industry has been enjoying.
Comparing the company to Rocky Balboa taking a beating from Clubber Lang in Rocky III, Armstrong said, “At some point, we won’t be against the ropes . . . watch our right hook.”
Armstrong said the painful staff reductions were in part driven by a need to better focus AOL’s brand strategy—and probably reduce some duplication with HuffPo, TechCrunch and other recent acquisitions. When he joined the company, AOL had 340 URLs. Now there are just 40.
Plus, personnel-wise, AOL is about half the size it was when Armstrong came on board. And the employee mix wasn’t right; two years ago AOL had as many engineers as editorial staffers. “That’s not an Internet company,” he said.
Despite all the change and staff reductions, Armstrong emphasized that traffic has remained stable or grown during his tenure, depending upon the property.
However, Armstrong announced that AOL is planning to hire more journalists and lessen its reliance on freelancers. At the same time, he defended the company’s Seed platform, which is often derisively referred to as a content farm. “Technology for journalists is not bad,” he said. “The press at large has written these unbelievable, crazy articles.”
Armstrong used the example of TechCrunch, which has built Crunchbase into a vast, popular directory of startups that is populated by freelancers and community contributors. “Crunchbase doesn’t need a full-time, highly paid editor,” he said.
On the flip side, he warned against relying too much on producing content just to get picked up by search engines. “People don’t type ‘Libya’ into a search box,” he said. “There is a danger if you go too far with an algorithm [approach]. Google is going to get frustrated.”
Besides enhancing AOL’s content product, Armstrong said the company has a major untapped opportunity in the e-commerce space, something he plans to go after this year. “We should have 10 percent to 20 percent of our revenue coming from e-commerce,” he said.
Among the other topics Armstrong discussed was Patch, AOL’s local media play which he says is generating a lot of interest from national brands (something AOL is testing right now), and the HuffPo integration process, which will likely result in some shared content (but the hope is to keep the two properties distinct).
Armstrong was also asked about executive turnover and AOL morale overall. Regarding his executive team, which is 90 percent different than the group he inherited, he revealed that previous leaders had little incentive to succeed. The company had a $30 million executive retention line item in the budget. “As the company performed worse, people got paid more,” Armstrong said. “We cut that out.”
Regarding AOL’s morale, which will surely take a hit in light of today’s layoffs, Armstrong tried to emphasize the positive energy gained by bold bets like the HuffPo deal. “The average AOL person . . . is saying, ‘I like what we are doing.’ We aren’t getting employees who aren’t mission driven,” he said.