Andrew FrankWhile much of the punditry surrounding Tim Armstrong’s appointment to the CEO post at AOL has focused on what it might mean for the beleaguered Time Warner unit, at least as big a question is what it means for Google. Tim Armstrong was Google’s main link with the advertising world, a Madison Ave guy in an archetypal Silicon Valley culture who just happened to bring in about 97% of the revenue.
Advertising was an accidental discovery at Google, which has always seen itself as a technology company focused on search. With cloud services looming as the Next Big Thing in IT, will Tim’s departure accelerate Google’s shift from advertising to cloud services as the primary focus of its business?
There are some faint indications this might be the case. For one thing, CEO Eric Schmidt has indicated that Google seeks to replace Tim with “an internal candidate.” That could be a tall order, given Armstrong’s deep media connections, although former Doubleclick CEO David Rosenblatt looks like a strong possibility. For another, Eric Schmidt clearly prefers talking about the cloud to talking about advertising. "Cloud computing is one of those changes that’s going to happen regardless of whether companies that are participating in the ecosystem allow it, because the technology will make it happen," he said recently at the Morgan Stanley Technology Conference in San Francisco. That says a lot.
On the other hand, Google is a highly analytic organization that knows how to protect its revenue. And if it needs to hire more Madison Avenue types to do that, I expect they won’t be too hard to find.
And what’s next for AOL? Tim Armstrong knows what he’s walking into – he was instrumental in putting together Google’s ill-fated $1B investment for 5% of AOL in 2005 – and his decision to join portends big changes for the organization, which has been searching for a new course for over two years.
AOL is an entity whose whole is worth less than the sum of its parts. It’s Platform-A suite consists of a number of strong ad platforms, such as ADTECH, Tacoda, advertising.com, Third Screen Media…all of which were leading products in their time. And the AOL network of consumer portals, tarnished as it may seem, continues to draw more visitors and minutes (271 million and 45 billion respectively in January according to Comscore) than Facebook, MySpace (or FIM), Twitter, or any other consumer portal with the exceptions of Google, Yahoo, and Microsoft. Still, all of these pieces never quite seemed to fit together right.
With the right kind of re-structuring, which is likely to involve major spin-offs to at least one of the aforementioned companies, perhaps Tim Armstrong could unlock the potential of these assets. But it’s going to take some challenging new relationships.
With the pool of revenue for online display advertising finally shrinking again, consolidation looks likely. Perhaps there’s something new for Google in there.
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Category: Advertising Media Tags: AOL, Google
