Web 2 Summit: Tim Armstrong On AOL Spin Off, Content, And A Mysterious New Tech

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37867v2-max-250x250At the Web 2.0 Summit today in San Francisco AOL’s chairman and CEO Tim Armstrong took the stage for a discussion with Federated Media’s John Battelle. Armstrong, who was previously in charge of the Google ad group in America, took the AOL job in March as the company prepares the split from its parent, Time Warner.

The Armstrong talk can be summarized pretty easily: Content, content, content. Armstrong made it very clear that not only is AOL in the process of spinning off into its own public company, but that they are now going to be a content company. In fact, they’ve gone from 500 journalists to over 3,000 since he took over, he said. And that will keep growing.

The idea is to grow AOL’s unique visitors and then figure out the best way to monetize it. But again, growth, will be the key. He’s not sure if 2010 will see that significant growth, but after that, he expects they’ll be going in the right way.

Notably, Armstrong also hinted at some new technology that AOL has been working on for the past 3 months now. When pressed, he would not say what it is, but said that they will be talking about it at a later date. Mysterious.

Armstrong says he took the AOL job partially because it was a risk. And he noted that if you’re not working in the Internet industry to take risks, you shouldn’t be in it. “If you’re not failing, you’re not trying hard enough,” he said.

Below find the full Q&A (paraphrased):

JB: You and Sergey dress a bit differently.

TA: This is his tie (laughs).

JB: Why take the AOL CEO job? You had other options, like a sandy beach.

TA: I wasn’t thinking about leaving (Google) but the AOL thing came up. I’m a big believer that this is just the beginning for the Internet. AOL has a lot of things that people don’t realize. It’s undervalued. Google was a great experience, but I wanted to learn again. I have on this job in the first 6 months already. And the company was ready to change.

JB: Would you have taken the job if you knew you couldn’t spin it out from Time Warner?

TA: That’s not true. But it does make sense to spin it out.

JB: It hasn’t happened but it will right?

TA: Yeah that’s the intention.

JB: How does one do that? Take it public, private?

TA: If you own Time Warner stock, you will get a share of whatever AOL is. It’s like the Time Warner cable offering. So you can buy a share of AOL too soon.

JB: Is the company ready for that?

TA: Everyone has worked really hard. Still more work to do. We need to prepare to go public, so we have to do investor relations and taxes, etc. We’re in a good position, working towards it.

JB: How profitability and rev growth?

TA: Well that’s the tricky part. (laughs) The company is very profitable. Most of it is paid services, very small is from dial-up. We’re very focused in growing a large platform around content now. That’s the hard work to get down. The rev 2010 for us will see the content coming up.

JB: Lot of AOL brands now, TMZ, women’s brands, etc. Will this be more of that?

TA: We have some secret sauce that I can’t announce. But we’ve been working on something for 3 months that’s a big tech shift. I can talk about it later.

JB: Wait, tell me more. What tech?

TA: It’s a broader platform with more information about content, and around content. I can’t give you a better answer. We’ve gone from 500 journalists to over 3,000. We’re going to keep growing. Our content is 80% our own, we’re going to keep going. It’s all about taking content management serious. There’s an opportunity there.

JB: Will AOL start acquiring again?

TA: Yeah the AOL/Yahoo deal that almost happened really set us back. Now we’ve flipped it, we’re not living in fear. We will acquire other companies again. I’m not sure who yet. Our money is going to the product right now, period.

JB: Talk to me about Twitter, all we’ve heard the past few days. Do you want to integrate Twitter?

TA: Yeah we’re interested in bringing in stuff like that. We have lifestreaming now, we do see that as a part of our future. Brad Garlinghouse’s mandate is ‘how do we take messaging to the next level?’ I’m a bit fan of Twitter, they’ve made it impactful. We’d be happy to use it in some way.

JB: What about Bing?

TA: I think they did a good job with Bing. They’re getting worthy attention. I was surprised.

JB: Can content-bases strategies scale? Content businesses don’t seem to get all the love that tech companies do.

TA: I don’t know what our valuation will be but people in the media business look at Silicon Valley companies with envy. We have the opposite view. Let’s take some tech and be serious about it, around our content.

JB: But how do you scale?

TA: I can’t tell you that! (Yet) I’ll use the television example. When you see the TV channels, look at the depth of content with 300 channels. It could be better. The distribution has massively changed with the Internet.

JB: The deal with Google, let’s talk about that. Is Google going to get a new search deal with you?

TA: AOL is not in the search business. We’re not in a rush to get a new deal done. We’re patiently working to get something done. Google has been a great partner. Google has a leg up on the relationship side, but in my AOL hat I need to make sure we get the right deal.

JB: What about Yahoo not being a search company anymore, like what AOL did a while ago? Did you agree with Sergey that Yahoo should have stayed going it alone?

TA: No, but I wasn’t as concerned as he was about it. Yahoo had to do what it had to do. It’s a tough market. Did I think we’d be major search partners with Yahoo? No. Now they’re getting out.

JB: What are the metrics how you judge where you are now and down the road?

TA: When I got there, pageviews were the main metric. I still am looking at that, more uniques, etc. We need to get to new areas of innovation too. Looking at user interest, etc. It may be tough in 2010, but post 2010, how do we get shareholder value? I think it comes from consumer value. I want to see large growth. Then we’ll figure out how to monetize those.

JB: What are they now?

TA: 270 million globally, 100 million in the U.S. but we’re changing things (unique visitors). 2010 should start showing things, but we may drop a bit at first, then we should see growth after that.

Audience Q&A

Q: What’s the vision for Patch? And what about Yellowpage revenue?

TA: Patch is in about 10 towns, it’s being tested. We’re trying to digitize towns. But all that town’s information online. The vision is that this is a business, but this could be good for the world. This is a core area we can innovate in. We’re excited about that area.

I think in the future the Yellowpage business will be much, much better than it is today. A lot of companies out there are working on it. And Patch will help.

Q: Talk about email and ICQ.

TA: We’ve have: content, ads, and communications. What you’re talking about is the last bucket. People ask why isn’t AIM a billion dollar business? For us, that’s about the community.

Q: 500 to 3,000 journalists? Holy cow, how’d you do that?

TA: Mainly it’s been hiring and getting free-lance people on payroll. We have come up with a content strategy that fragmentation is our friend. We started to quickly add content when we see successful ideas. We’re doing over 3,000 pieces of content a day online, and much more than that soon. We’re also now doing 3-4 times the amount of video we were doing a few months ago. This is a way for us to build a community. We’ve been hiring big names from ESPN and WSJ. For journalism, you’re not just hiring the person, you’re hiring their community too.

Q: What about using new devices?

TA: There’s some interesting stuff from a device perspective. But we’re just thinking about the users now, no matter what they use. Mobile will be even more important in the future. I’m agnostic towards the devices though.

Q: So will mobile be it’s own interface?

TA: I don’t know.

JB: What about Google going into content?

TA: I know Google gets criticized a lot for going into new areas, but they keep ahead of the curves. They’re very good at that. It makes sense to test things, even if they don’t work out. It’s more than just sitting around the room and thinking about it. “If you’re not failing, you’re not trying hard enough.” AOL used to take no risks, now we’re changing that.

Bebo is a great product, we’ve pulled it back out and are trying to do it as its own product again. Shame on us for trying to integrate it to all this other stuff. I came to AOL because it’s a risk. If you’re not ready for that, the Internet isn’t for you.

That’s a wrap.

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