Updated: Google's Armstrong to Lead AOL

NEW YORK The top sales executive from the Internet’s most powerful company has left to head up one of its most troubled firms.Tim Armstrong, Google’s president, advertising and commerce, North America, is leaving the search giant to take the reins at AOL. The longtime face of Google’s ad business, Armstrong has been named the new chairman and CEO of AOL. Current chairman and CEO Randy Falco and president, COO Ron Grant are both on their way out.Analysts, advertisers and bloggers have become increasingly vocal about the future of AOL in recent weeks. Several have publicly called for Falco and Grant’s ouster. Thursday morning, Pali Research analyst Richard Greenfield issued a blistering missive titled “AOL's Randy and Ron Show Must End.” In that note he wrote that AOL’s EBITDA had declined 50 percent since 2006 when Falco and Grant came on board from NBCU. Greenfield and others have been particularly critical of AOL’s seemingly endless series of shifts in focus, such as betting heavily on the ad network business with the formation of Platform-A , followed by the recent shift back to emphasizing original content and traditional brand selling. AOL has also been slammed by many for last year's $850 million acquisition of the social networking property Bebo.Now, the Time Warner-owned portal turns to Armstrong, one of the more respected sales executives in the digital space, to figure out what to do with the company next.“Tim is the right executive to move AOL into the next phase of its evolution,” said Time Warner chairman and CEO Jeff Bewkes in a statement. He continued: “He’s an advertising pioneer with a stellar reputation and proven track record. We are privileged to have him preside over AOL as its audience and programming businesses continue to grow and its advertising platform expands globally. He’ll also be helpful in helping Time Warner determine the optimal structure for AOL.”The reshuffle could also be a sign that TW won't sell AOL outright. Instead, the company seems likely to spin it off and leave it in the hands of a Web professional. Hanging on to it or finding a merger or alliance partner in a structure that would benefit from Armstrong's leadership is also an option. But a spin-off similar to the one of TW Cable later this month seems a distinct option given Armstrong's stature and the fact that AOL hasn't been able to reach deals in talks with the likes of Yahoo and Microsoft. "We believe the only reason that Armstrong would agree to run AOL is the ability to manage a public company of his own in the near future," said Pali's Greenfield after Armstrong's appointment had been disclosed. He added: "Tonight's management change at AOL is a significant positive for TW shares, as it will mitigate fears [at least near term] about TW's most worrisome asset."Armstrong is expected to start at AOL in April. He worked at Google for nearly nine years. The company said it plans to replace him from within.This story updates and replaces an item posted on Thursday with additional details and updated commentary from Greenfield.

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Updated: Google's Armstrong to Lead AOL

Mike Shields

Georg Szalai, The Hollywood Reporter

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Mike Shields

Georg Szalai, The Hollywood Reporter