A Conversation With Brad Garlinghouse, AOL's President Of Consumer Applications

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Last week I sat down with Brad Garlinghouse, a former Yahoo executive who now runs all of AOL’s social and mobile products. You can meet Brad, who joined AOL six months ago, at our upcoming TechCrunch Disrupt conference in New York.

Brad spoke about his product plans for AOL mail, saying that it’s time we reinvented the inbox to aggregate all of the different ways people communicate with each other online today.

There hasn’t been much innovation in e-mail in a long time. I mean, listen I’ll pick on a different competitor. You know, Gmail was profound when Gmail came out. Gmail hasn’t done as much in the last 5 years. The interesting about this is there continues to be pain in the consumer experience, right? When you think about the inbox, it has proliferated and there are more and more inboxes in my life.

Aggregation of social streams seems to be a big part of what his team is up to. AOL Lifestream, a new product that launched two weeks ago, is clearly part of this strategy:

One of the things that I think is part of the change at AOL is an understanding and focus about what we are and what we are not. AOL isn’t confused about the idea, ‘hey, we’re trying to be a social network.’ We’re not. We’re trying to create more social experiences by partnering with players who are very, very good at what they do. I don’t think all our competitors have gotten that same message that, hey there’s some very powerful and very good at what they do players, and I mean, particularly Facebook and I think we take a point of view as evidenced through AIM that, great. How do we partner with Facebook? How do we help Facebook? And how does that help AIM and how does that help the user? Lifestream clearly is another example of that.

He also talks about the impact of relatively small changes – a removal of 65% of the ad units on the mail product, he says, resulted in higher new signups and user satisfaction.

Brad also spoke about Yahoo and it’s chances for success (something I spoke with another former Yahoo exec, Caterina Fake, about recently). Specifically I asked him about Yahoo CEO Carol Bartz’s recent statement that AOL was little more than a “mini Yahoo.”

Our exchange:

Garlinghouse: When I hear Yahoo! saying that AOL is a mini Yahoo!, I kind of feel flattered that they are going to follow us in our strategy.

Arrington: Carol Bartz called AOL a mini Yahoo! The first thing that pops in your head is “I’m flattered?” I thought we were going to cut all of the BS out of this interview with you. So I thought you were still a warrior saying, I’m sorry, no. We have a strategy, what’s Yahoo’s strategy?

Garlinghouse: But I think, you know, you were seeing the world ask that question. That question has been asked for a long time at Yahoo! and it’s not clear to me. I was actually very hopeful when the search deal was announced.

Arrington: Should it be clear? I mean, shouldn’t Yahoo! strategy be clear to the world? They’re a public company.

Garlinghouse: It should be – maybe I’m not giving as much attention to Yahoo! these days.

And later:

Garlinghouse: If you step back, the 12 step process, first you must start by admitting you have a problem. And a lot of things should go from that. And I give the management team at Yahoo! credit for making some decisions they have. Obviously, they’ve sold HotJobs…[there continue to be] opportunities to focus on a handful areas that they want to be the best in the world, and that is, I think, directionally good.

Arrington: What are those areas?

Garlinghouse: I don’t know. Let’s go ask Carol.

The full transcript is below, care of PhoneTag:

Mr. MICHAEL ARRINGTON: Hi, Brad Garlinghouse, the president of Consumer Applications at AOL. Hi, Brad.

Mr. BRAD GARLINGHOUSE (President, Consumer Applications, AOL): Mike, how are you?

Mr. ARRINGTON: Thanks for letting me come by your office. You’ve been here for 6 months now almost exactly. You started in September 2009. Wanted to ask you how things had gone over the last 6 months, looking forward a little bit just getting your things and other things going on in Silicon Valley.

Mr. GARLINGHOUSE: Fabulous.

Mr. ARRINGTON: What is it that you own at AOL?

Mr. GARLINGHOUSE: So my responsibilities here are what we call the Consumer Applications Group. It’s a mixture of AOL’s mobile efforts, mail, AIM, and ICQ as well as the client bits if you will. That includes everything from our toolbar efforts as well as the traditional AOL client which has, you know, close to 10 million people still using AOL client, in the United States.

Mr. ARRINGTON: So, there’s a big overlap from what you did at Yahoo and what you’re doing here at AOL. There’s additional pieces you own here, mobile for example is one of those.

Mr. GARLINGHOUSE: Right.

Mr. ARRINGTON: But what have you done in the last 6 months? Some of these are housekeeping items. Some of these are brand new products including Lifestream which you released earlier this week.

Mr. GARLINGHOUSE: Yup.

Mr. ARRINGTON: You told me, you know, what have you done so far and what the plan is for the future?

Mr. GARLINGHOUSE: I realized, a couple quick highlight of thoughts. One of the things – at the most macro level, I mean, AOL is changing. It’s changing dramatically and that’s like…

Mr. ARRINGTON: Really or like, you know, you say that because that’s what you say?

Mr. GARLINGHOUSE: No.

Mr. ARRINGTON: Because I hear the same thing from Yahoo which we will talk about maybe later. But, I mean, I think AOL is changing dramatically how. They got spin off what’s different, really like cutting through all the bullshit. What’s different?

Mr. GARLINGHOUSE: I think at the end of the day when you completely change, you may ask your team, culture starts from the top and the culture here, I mean, you and I walked…

Mr. ARRINGTON: (unintelligible) management team has completely changed.

Mr. GARLINGHOUSE: You and I walked around this office and I think, we both observed and agree that this is a very different place. It feels different. If you go to our offices in New York, it feels different, you know, you still have…

Mr. ARRINGTON: The morale is high, is what you’re saying. I mean, there’s a real feeling here what you’re doing is something important.

Mr. GARLINGHOUSE: Yes.

Mr. ARRINGTON: Which wasn’t in AOL, I mean, you’re too good at AOL but it wasn’t that feeling.

Mr. GARLINGHOUSE: I think there’s – I fundamentally believe that we can win as I fundamentally believe that we are better poised today and that they comfort at heart(ph) for taking risk for focusing on the consumer experience. And I think, you know, over time, AOL increasingly was focused on let’s just do more to monetize, monetize, monetize. I don’t have a history and understanding exactly other things came to pass, whether there’s Time Warner pressure or what have you, but you see a company stepping back, and you know, one of the things we did two months into my tenure is we did a refresh of AOL mail. We took 65% of the ads, the ad units in the AOL mail out. You know, that’s a big change, it impacts the user experience and there’s a commitment to the consumer experience, I think it has changed. And that’s a part of culture.

Mr. ARRINGTON: Have you been able to measure the impact of that since then?

Mr. GARLINGHOUSE: You absolutely can tell. And it’s partly in just customer satisfaction. There’s partly increased registrations. People are – you know, as people start to hear how AOL is changing and how the products are changing, they step back and they say how much of this is expected from AOL.

Mr. ARRINGTON: How many people use AOL now?

Mr. GARLINGHOUSE: I think, accounts grow, I’d say somewhere around 25 to 30 million, a number of 32 million accounts per se.

Mr. ARRINGTON: OK so and what else should be done? What was that project hygiene we talked about that earlier?

Mr. GARLINGHOUSE: Project hygiene, it’s very much how do we clean up some of the basics of what we’re doing.

Mr. ARRINGTON: We also haven’t been shy about integrating with other third party services like you integrated Facebook directly into AIM…

Mr. GARLINGHOUSE: Yup.

Mr. ARRINGTON: …a month ago, a few weeks ago and then the Lifestream, which we wrote about is an aggregator and publisher to social networks. You see more of that?

Mr. GARLINGHOUSE: One of the things that I think is part of the change at AOL is an understanding and focus about what we are and what we are not. AOL isn’t confused about the idea, ‘hey, we’re trying to be a social network.’ We’re not. We’re trying to create more social experiences by partnering with players who are very, very good at what they do. I don’t think all our competitors have gotten that same message that, hey there’s some very powerful and very good at what they do players, and I mean, particularly Facebook and I think we take a point of view as evidenced through AIM that, great. How do we partner with Facebook? How do we help Facebook? And how does that help AIM and how does that help the user? Lifestream clearly is another example of that. In analysis of Lifestream even more so is an example of us going from playing defense to other company to playing offense. That’s part of that cultural shift where we want to innovate, we want to identify new segments that address core consumer pain. And I think, you know, you, I, we have a lot of touch points on the web and the online consumer experience is getting more confusing. Lifestream is the solution and takes away consumer paying and that category is going to continue to grow and I think we have a very – the data, external data which suggest, we have by far the largest social aggregation play in the market today.

Mr. ARRINGTON: If you take away AOL’s dialup business which is still, I think is decreasing a third a year but still 700 million dollar a year in free cash, right, or something like that. AOL isn’t today a profitable entity. You talked about winning earlier. Is winning getting in the point where AOL is truly a profitable sustainable long term company or winning means something different to you and how do you get there without that dialup business which goes away?

Mr. GARLINGHOUSE: You know, depending upon which analyst reports you look at, some of that may not be exactly the same. That being said, you know, it’s very…

Mr. ARRINGTON: I thought you have great numbers on your laptop.

Mr. GARLINGHOUSE: I think it’s very clear that we want to focus on building out a fabulous web service in the business and that is primarily an ad supported business. You know, that business today is – you know, I don’t know what the analysts say in sizes, but it’s – you know it’s quite large relative to most competitors and we are focused on growing that business. How do I focus on winning? I mean, look, you know me a little bit. I’m a very competitive person. I want to win. You know, in the immediate term, winning is probably measured by demonstrating to consumers and as well as Wall Street analysts that we are engaging users and getting them to come back and check out our services and have great experiences. That is what we talked about earlier. Lifestream is a great example of that. People they’re like, wow, I didn’t expect this from AOL.

Mr. ARRINGTON: Let’s talk about the future. Specifically, what to expect out of your group over the next, say 12 months, things you have planned that you’re willing to talk about in broad strokes.

Mr. GARLINGHOUSE: Yeah.

Mr. ARRINGTON: Things that we should start getting excited about now.

Mr. GARLINGHOUSE: You know, the first broad highlight is, we are clearly re-investing in AOL mail and…

Mr. ARRINGTON: How do you get excited about e-mail these days?

Mr. GARLINGHOUSE: Actually, the reason why, there hasn’t been much innovation in e-mail in a long time. I mean, listen I’ll pick on a different competitor. You know, Gmail was profound when Gmail came out. Gmail hasn’t done as much in the last 5 years. The interesting about this is there continues to be pain in the consumer experience, right? When you think about the inbox, it has proliferated and there are more and more inboxes in my life. And that actually – that consumer pain is you know not a…

Mr. ARRINGTON: Is the solution what Buzz has done with moving like the social stuff into the Gmail inbox because that seems to be a pain for people as well.

Mr. GARLINGHOUSE: You know, I don’t – I think Buzz is hard to…I think…

Mr. ARRINGTON: I noticed you didn’t integrate Buzz into Lifestream.

Mr. GARLINGHOUSE: At its core…

Mr. ARRINGTON: I mean, you even integrated MySpace into Lifestream but not Google Buzz. That’s such a recent product in regard to…

Mr. GARLINGHOUSE: At its core, e-mail is definitely I think, there remain opportunities to innovate around e-mail and if you could deliver about these experiences…

Mr. ARRINGTON: What’s an easy, easy big thing to do to fix my e-mail, to make it better, substantially better?

Mr. GARLINGHOUSE: I do think that there are opportunities around inbox aggregation that have not been well executed more in the industry…

Mr. ARRINGTON: Aggregation of like Facebook inbox. What are other inboxes?

Mr. GARLINGHOUSE: How many inboxes do you have in your life? You know, you have Facebook inbox. You have a Linkedln inbox. You have a Twitter inbox.

Mr. ARRINGTON: Text messaging.

Mr. GARLINGHOUSE: SMS, you know, these are still – I mean granted that these are the things in the industry to talk about 15 or 20 years in unified messaging. And some intentionally not, like say, hey, we have a better unified messaging experience. My point is more to say when people talk about this, there’s a very funny Wall Street Journal article in the last six months. Well, since I’ve been here at AOL, talked about, you know that kind of the death of e-mail. You know, the rumor has since demised, have definitely been exaggerated. I think the most humorous part of that Wall Street Journal article is it concluded with one of the research reporters e-mailed her ad, you know. And it said that, you know, social networks have grown – are now larger than e-mail. Every social network I know requires an e-mail used to log in. There is actually data amongst the people – Nielsen did some very interesting research about the heaviest social networking users who are actually using e-mail more now in part because so much of the activity around social networks end up in your e-mail box.

Mr. ARRINGTON: So do you think, by the end of this year, we are in 2010, you think by the end of this year, we’ll see substantial products being released around mail that may convince people – people like me to use AOL mail as their mail provider?

Mr. GARLINGHOUSE: I think…

Mr. ARRINGTON: Was there another time frame to get there?

Mr. GARLINGHOUSE: No.

Mr. ARRINGTON: First, let me – before you had Oddpost, right? You bought Oddpost at Yahoo. It was such a game changer. Is there something when you acquire a bill that you think can be a game changer this year for AOL mail?

Mr. GARLINGHOUSE: I think yes. I think that, Michael, this year for AOL mail, is for people to take another look. If the people come back and say, interesting, I’m impressed this is from AOL. We started to demonstrate some of that with the AIM Facebook announcement. We started demonstrating that with the Lifestream announcement and I think we can continue to do that, not just within mail but across a number of things we’re delivering at AOL, mobile, the number of interesting things going on that I think, at the end of this year, if the world steps back and says, this management team – this new management team actually is living up to its expectations, I’ll be very happy.

Mr. ARRINGTON: So, before you joined AOL, you were briefly at Silver Lake Partners?

Mr. GARLINGHOUSE: Yes.

Mr. ARRINGTON: As a – what were you? An adviser, we think you’re joining full time

Mr. GARLINGHOUSE: I was technically called a senior adviser. You know, private equity firms don’t do EIR Programs per se with respect to EIR and Silver Lake at that time had not had as much depth in the internet space. I mean, obviously, they have a fabulous track record. They’ve done a little bit more in the internet space and certainly have been more interested in that space. So they brought in account people who were more from the web environment.

Mr. ARRINGTON: So, they were the big money in the Skype acquisition.

Mr. GARLINGHOUSE: Yeah.

Mr. ARRINGTON: Did you work on that deal at all? Were you looking at it?

Mr. GARLINGHOUSE: Tangentially, you know, most of the stuff I was looking at was in the Silver Lake Sumeru Fund which is in the mid-market fund looking to spend 50 million to $150 million checks as part of the whole $1.2 billion fund. Silver Lake Partners is a larger fund that actually did as kind of semantics in details but they did the big check and it’s, I think, a $9 billion fund. But obviously, it was a resource working at Silver Lake Partners as well as the market fund.

Mr. ARRINGTON: So before that, you were at Yahoo. Right (unintelligible) you left Yahoo in the middle of 2008.

Mr. GARLINGHOUSE: Actually, now (unintelligible) departure in the middle of 2008 stuck around for a while helping the transition items but then left Yahoo and joined Silver Lake.

Mr. ARRINGTON: And so at Yahoo, you were head of – what was it called? Your Mail Flickr, Mash and Yahoo Instant Messenger.

Mr. GARLINGHOUSE: Yes.

Mr. ARRINGTON: What else? What was it called?

Mr. GARLINGHOUSE: The group for different incarnations was CCF, Communications Community Front Doors. Then it evolved where Front Doors which is the homepage, My Yahoo came out and then it (unintelligible) ran that group very effectively. But that was a core Flickr Mail Messenger…

Mr. ARRINGTON: Mash…

Mr. GARLINGHOUSE: Exactly.

Mr. ARRINGTON: That the social network with Darth Vader and a banana, with a guitar.

Mr. GARLINGHOUSE: Yeah. The idea behind Mash which, you know, I think…

Mr. ARRINGTON: Have to take a look at it.

Mr. GARLINGHOUSE: Actually, the idea behind Mash I think is very interesting. It’s really the wikification(ph) of people’s profiles because even now for me to go and just plain(ph) edit other people’s stuff, you can’t really do. I think you can make a richer experience make other people- particularly trusted people participate in it.

Mr. ARRINGTON: Maybe we can schedule additional times so we can go to more detail of Mash. Let’s talk about some of the other things beside Mash that you accomplished at Yahoo! So you joined Yahoo, when? You were there before three years.

Mr. GARLINGHOUSE: Early March of 2003.

Mr. ARRINGTON: So at that time, mail was your huge product, Mail Messenger, right? Yahoo! Mail was, you know, number three player, number four player and you knew(ph) about Oddpost. Tell me a little bit of like the first steps you took there to sort of make Yahoo the number one player in mail.

Mr. GARLINGHOUSE: Yeah. Yeah. Oh, it’s actually I think it wasn’t that long. Well actually, people forget like how much has changed in the e-mail space these years. Really, the first thing we focused on was anti-spam. In 2003, there you know, Bill Gates came out and said, he’s going to solve spam and there’s a ton – it was increasingly a huge problem that the industry has gotten more of their arms around. So we were better than our competitors at that time. It was usually Hotmail and AOL and we clearly had gotten a better handle on anti-spam and we did a lot from a marketing point as to take advantage of that. We bought Oddpost in the spring of 2004 which really, for my part it was the best deal that I was involved with during my Yahoo tenure. And it was, I think a mixture of the right people there, the right technology bed and that really became the foundation for the all new Yahoo! Mail, internally at that time we called Candygram and…

Mr. ARRINGTON: It was the first mail application online that worked sort of like a desktop application.

Mr. GARLINGHOUSE: Yeah.

Mr. ARRINGTON: Job descriptor way before – that gave Web 2.0 and all these new start ups came out.

Mr. GARLINGHOUSE: Yes.

Mr. ARRINGTON: And it was a really nice sort of interface.

Mr. GARLINGHOUSE: Yeah.

Mr. ARRINGTON: People loved. They continue to use.

Mr. GARLINGHOUSE: It was incredibly well done and I…

Mr. ARRINGTON: It’s (unintelligible) help how to grow.

Mr. GARLINGHOUSE: Well, it really differentiates us in a pretty commoditized market. It puts Yahoo! Mail as doing interesting different innovative stuff and you know. The number one reason why even today people adopt various e-mail products is based on word of mouth their friends recommend. And when you get people coming in, trying a product and service they like, wow, that’s great. They tell their friends about it. And started to see increasingly a nice trajectory as people band and other players join us at Yahoo at that time.

Mr. ARRINGTON: You can later write me a note, unlimited storage. Tell me about the storage at Yahoo! Mail. Was that unlimited or…

Mr. GARLINGHOUSE: It actually is an interesting- I mean, I will admit strictly now this is, you know, a couple handful of years later. Gmail launched, I think, around April 1, 2004, and you know, not surprisingly, internally at Yahoo!, you know, it got a lot, a lot, a lot of attention. And I give the team at Yahoo! a ton of credit for reacting very quickly and change the dynamics as could as we could for our users and you know, it’s easy to launch the gigabyte storage when you don’t have users. It’s harder when you already have tens and millions of users to just line up a gig of storage.

Mr. ARRINGTON: And that’s when you move on unlimited storage?

Mr. GARLINGHOUSE: It took us about, I don’t know, a year. We mainly moved to a hundred megs, we went to 250, we went to a gig. Within a year, we went to unlimited storage and we were just like, we’re taking this off the table. And, you know, it is again, it’s unbelievable to really sit back and I think six years ago when you got a Hotmail account, you got two megabytes of storage for free. When you got Yahoo! account, you have four megabytes of storage for free.

Mr. ARRINGTON: So much spam. Can’t store much spam in four megabytes. Three weeks ago, two weeks ago, Carol Bartz defined Yahoo!, sorry to find AOL as a mini Yahoo! Is she right?

Mr. GARLINGHOUSE: You know, if you step back and left the industry, I think this is true broadly. I thought a million to believe the first step to solving a problem is admitting you have a problem…

Mr. ARRINGTON: Yahoo! admitted they have a problem?

Mr. GARLINGHOUSE: One of the things that is very clear at AOL is there’s no confusion with the management team that we have challenges and we have identified those and we have been very aggressive about calling them out and working to fix them. I don’t see our competitors universally- yeah, I think some of them have said that, you know, the language I hear is that yes, there are problems but I don’t see the actions demonstrating that in fact, here is how we are getting better as a company. You know, I guess, Yahoo! is a very, very strong company. And they make a lot of money. And I guess Carol- you know, I think AOL has been very aggressive about defining a very clear strategy of where we’re going. When I hear Yahoo! saying that AOL is a mini Yahoo!, I cannot feel flattered that they are going to follow us in our strategy.

Mr. ARRINGTON: Oh, come on.

Mr. GARLINGHOUSE: I think there’s no question if you look back…

Mr. ARRINGTON: Carol Bartz called AOL a mini Yahoo! The first thing that pops in your head, I’m flattered. I thought we were going to cut all of the BS out of this interview with you. So I think we’re still warriors saying, I’m sorry, no. Like, we have a strategy, what’s Yahoo’s strategy?

Mr. GARLINGHOUSE: But I think, you know, you were seeing the world ask that question. That question has been asked for a long time at Yahoo! and I think that is still – and it’s not clear to me. I was actually very helpful when the search deal was announced.

Mr. ARRINGTON: Should it be clear? I mean, shouldn’t Yahoo! strategy be clear to the world? They’re a private company.

Mr. GARLINGHOUSE: It should be – maybe I’m not giving as much attention to Yahoo! these days.

Mr. ARRINGTON: I do. I don’t know what it is that there- you know, search (unintelligible). I’ll do that – I’ll set my rant for the post but I think as an ex-senior executive at Yahoo!, you have some idea of what it is their strategy is.

Mr. GARLINGHOUSE: Yahoo! was a fabulous experience for me. I totally enjoyed my experience there. I also made a decision to leave based on lots and lots of factors. I fundamentally…

Mr. ARRINGTON: What’s the number one factor?

Mr. GARLINGHOUSE: I fundamentally believe that in a company like AOL, that’s more willing to take risks and more willing to say, we’re going to be aggressive in some areas, it’s very difficult. There’s a classic innovator’s dilemma…

Mr. ARRINGTON: Is that when it comes down to you as AOL is clearly taking a risk? I think everyone would agree. AOL exceed with all the staff, that you’re hiring a thousand journalists on the other side of business that worked New York, the stuff that you’re doing out here in California although I think you’re also bi-coastal. Clearly risk had been taken here.

Mr. GARLINGHOUSE: Yeah.

Mr. ARRINGTON: Risk is a- as far as I can tell, Yahoo! is taking less and less risk overtime. Is that really the fundamental difference you think?

Mr. GARLINGHOUSE: Well, I admit I’m not day-to-day involved with Yahoo! at this point. So I don’t claim to have…

Mr. ARRINGTON: Interesting enough (unintelligible) search they’ve hedged with Facebook complaining (unintelligible) finding pointing to a little more detail here than we have to in Yahoo! but I don’t see whether there really, like the big answer being placed, if any.

Mr. GARLINGHOUSE: The question was actually, I think, if you step back, the 12 step process, first you must start by admitting you have a problem. And a lot of things should go from that. And I give the management team at Yahoo! credit for making some decisions they have. Obviously, they’ve solved HotJobs, something else, they solved, I can’t remember right now. You know, and there are, I think, continue the opportunities to focus on a handful areas that they want to be the best in the world, and that is, I think, directionally good.

MR. ARRINGTON: What are those areas?

Mr. GARLINGHOUSE: I don’t know. Let’s go ask Carol.

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