Last updated: March 13, 2009 11:14 pm

Goodbye AOL

Whatever colour you paint a donkey, the eeyoring is unmistakable. AOL’s new chief executive, Tim Armstrong, should consider that as he saddles up at the internet company. The management he replaces was not the first to be thrown by a business that many believe belongs in the knacker’s yard.

The temptation for the young ex-Googler was clearly the opportunity to make his name by transforming AOL. If Time Warner chooses to spin its problem out to shareholders – likely given the lack of interested buyers for it – Mr Armstrong will find himself running a public technology company. That is something the former sociology student was unlikely to achieve at a company of engineers, in spite of a successful career running Google’s North American advertising sales department.

What, though, can he do? Incredibly, AOL still runs a dial-up internet business that will continue to churn out cash as it withers. However, this has already been separated out on paper at least. The main company is a collection of internet sites connected by the AOL portal; a search business run by Google; Bebo, a social network popular with teenage girls in the UK, for which AOL paid $850m; and a mess of advertising platforms.

Bashing together the jumble of acquisitions made in recent years is one task where at least identifying the problem is relatively straightforward. A new broom will also help to restore sagging morale, and Mr Armstrong will ultimately be assisted by a recovery in the advertising market.

Yet the more existential problem for AOL is that it is a billboard in an online world with infinite billboard space. It has some valuable and popular content – celebrity site TMZ for instance – but as the world becomes used to the internet, the idea of a portal to guide the user through it seems one for a previous age.

BACKGROUND NEWS
 

Time Warner is turning to the man who helped transform Google into the most powerful online advertising business in the world to fix its struggling AOL internet division.

In its second management upheaval in two years, the company that owns the Warner Bros movie studio and CNN has lured Tim Armstrong, president of Google’s North American sales team, to be chief executive of AOL.

Time Warner is hoping Mr Armstrong will help it decide what to do with a division that has sought to restructure from a dial-up internet services business into an advertising one-stop hop, but has continued to trail behind rivals in key areas.

Randy Falco, former chief executive of AOL, and Ron Grant, former president, are to leave the company. They were ousted after failing to stem a precipitous drop in online ad sales that is expected to continue through 2009, one person familiar with the matter said.

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