Will Our Beloved AOL Ever Thrive Again?

AOLThe verdict is in! According to TheWeek.com, in the race to build the best alternative to the now deceased Google RSS Reader, the winner is…

Not AOL.

TheWeek.com did an analysis of some of the leading candidates that attempted to launch or relaunch new RSS readers as an attempt to fill the void being left by Google’s departure from the RSS reader game. In that analysis, they came to the conclusion that there were three leading candidates for the top spot, and the winner was Digg over both Feedly (second) and AOL (third).

Now, I’m certainly not here to tell you why I agree or disagree with TheWeek.com’s assessment–that would indeed be the most boring blog post I have ever written, and I have written a lot of crap. Instead, I want to ask the question, why on earth does AOL keep doing this to itself?

AOL is a great company. It’s the reason that, as a 13-year old boy, I was able to get on the internet. Without their simplistic CD and dial-up service, I don’t know if my household would have ever figured out how to get online. But with AOL, I was able to IM friends, read sports articles, and get into chatrooms that I had no business in.

But here we sit, almost 16 years after my first internet experience, and 22 years after the America Online brand was first introduced to the country, and the company that helped so many helpless parents get their millennial children online for the first time is the subject of constant criticism.

Obviously, there was the whole Time Warner merger thing, which in one fell swoop, took two of the nation’s leading media/tech companies and made the then biggest merger in American business history the laughing stock of business school classes across the world. Then there was the heavy criticism in 2011 over the company’s then year-old strategy to become a digital media company, which was only flamed by the acquisitions of Huffington Post and Patch. And let us gloss over Patch, a novel business in my opinion, but a business that may mimic that of my local newspaper too much, and it is probably not a venture that is profitable enough for a company of AOL’s desired size.

And with all that said, in it’s last quarterly report, AOL showed losses on everything but its legacy subscription business–you know, the one that got me on the internet 16 years ago. Huffington Post, Patch, TechCrunch and the other properties that are a part of their digital media offerings (which will now include the infamous, third-place, AOL reader), lost $5 million for the company. Perhaps that business segment may squeak into profitability in the near future, but with the legacy business garnering more than $140 million in profit last quarter, one has to question where AOL’s focus really should be.

Now, I say all of that knowing that AOL does have something of a strategy when it comes to its content business–especially since they cannot survive on selling internet subscriptions forever. Thus, AOL wants to build brands, and they want to own destination sites where users will go for their information and entertainment. As the organizer for the MBA Media & Entertainment Conference in New York earlier this year, I got to hear AOL CEO Tim Armstrong talk about how he thought brands would be what separates AOL from other “tech” companies. And Armstrong has constantly talked about the advertising business that AOL is growing and pursuing.

But when I hear about the strategy for AOL and reports on its financials, all I hear is second place.

I hear they want to build online brands, but can they really compete with traditional forms of original content that simply bring themselves online, like an HBO, New York Times or Vevo? HBO and Netflix will always have bigger and better video than AOL. The New York Times, while competing with Huffington Post on terms of visitors, is the unquestionable leader in monetizing its the eyeballs for its news content. Not to mention, Huffington Post is now attempting to compete on a global level, which may be a temporary strategy for increasing revenue, but only means that this once small, but focused and thriving enterprise is now going to be competing with media companies across the globe. And Vevo is just an example of a traditional music company taking essentially free content and making a ton of revenue off of it in the digital space.

When it comes to advertising, AOL does well with AOL Networks and Advertising.com, but these are not the businesses of Fortune 1000 companies. These are the ideas of either co-eds or foreign, tech-smart entrepreneurs trying to sell their companies to Google and Yahoo. And if AOL thinks they are going to turn AOL Networks into AdWords or “i” anything, they will have another thing coming.

And don’t even get me started on the subscription business. That just screams playing for second-place, and that the ever-so-apparent reality of that business is, while it somehow manages to “grow,” it is going to take a fall to cable and broadband companies who can do that business at the local level.

So at a time in its company’s history, when getting much further beyond the $2.8 billion valuation seems daunting, AOL is now going into the RSS Reader business, a line of business that Google, a company that still has Feedburner and Google Voice, considered too small to continue. (Full disclosure: I am a user of Google Voice–SMS me!)

Listen, I completely respect Tim Armstrong, and I think he has a vision for AOL that is going to keep the company in the public eye for a very long time. I just think that far too many of the company’s undertakings are playing for second-place–at best. If you want to be one of the preeminent tech, or even media companies in the world, you have to be the best at something. From Google to 21st Century Fox, there’s no company in this space that gets as much attention for not being the best at anything as much as AOL does. Perhaps the analysts, writers and users of AOL that continue to hype them up all got their first tastes of the internet through America Online, too, and they just can’t let go of the company, or those dated aol.com email addresses. It’s too bad for all those people, and AOL, that just about all of them no longer need AOL to get online, to read RSS feeds, or for that matter, anything else we now do on the internet.

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