Monday, February 07, 2011

AOL marriage with HuffPost brings an Internet pioneer full circle

Interesting how discussions with friends and colleagues on Twitter and Facebook sometimes turn into the inspiration for posts on my other blogs, be it Moto-Mojo, my blog as a "motorcycling mobile journo" or here at Media Gleaner.

After I tweeted the first announcement I saw this morning about AOL acquiring Huffington Post, it wasn't long before a former colleague commented that he thought it bode ill for HuffPost, since founders so often don't stay when their companies are bought.

Yet I don't think Arianna Huffington is going anywhere. She came to the table willingly and has just been handed the reins of AOL's content candy store to remake in the HuffPost image. Given her stated intention to grow HuffPost exponentially, I think we should take her at her word that this is a marriage made in heaven.

Opinion Divided

Opinion on today's announcement has been sharply divided. Jeff Jarvis, author of What Would Google Do? and associate professor and director of the interactive journalism program and the new business models for news project at the City University of New York’s Graduate School of Journalism, hailed it as a smart move on AOL's part, and wondered why newspapers hadn't done what HuffPost did -- and didn't try to duplicate its success once it had.

Howard Fineman, senior political editor of the Huffington Post, wrote that this is yet another sign that old-style journalism must learn to take advantage of and work with citizen journalism in order to meet the demands of a global, 24-hour news day.

Salon called it "AOL/Time Warner all over again," and a "flashback to 2000 and the colossally ill-fated AOL/Time-Warner deal."

Business Insider did a nice, tidy list of what's in it for AOL and what's in it for HuffPost. In brief, Arianna just made a whack of cash for her shareholders while AOL just took a shortcut to prime time relevance after almost a decade of wandering the desert. So, there's no need to rehash that here.

I've always had a soft spot for AOL. From the early days when it struck a deal to put news from the San Jose Mercury News online, those of us working in newspapers who saw our future on the Internet hoped we could convince our newspapers to do the same. Then the Time Warner debacle hit and almost sank the ship. "See?" newspaper editors everywhere crowed. "The Internet is a flash in the pan."

They were wrong, but were unable to see past what came next -- the bursting of the overpriced, overhyped Internet bubble -- to realize it.

Old Media vs. New Media

My former colleague, Glen Farrelly, with whom I worked with at (aka after it merged with MoneySense magazine) at the time of the AOL Time Warner merger, told me on Facebook today that he never understood why the merger hadn't worked. At the time, it looked like a perfect marriage of old and new media. But what Time Warner shared with old media such as newspapers was its resistance to new media, and a belief (as I once heard an editor at The Gazette in Montreal say) that the Internet was a "passing fad."

Now "old media" is finally cluing in to Web 1.0 and having trouble *understanding* Web. 2.0 let alone transitioning to it. And AOL is investing heavily in one of the best known Web 2.0 creations.

In the interest of full disclosure, you should know I worked as the product manager for AOL Canada's finance channel between 2003 (two years after the merger) and 2005. And am now a blogger for WalletPop Canada, its current finance channel. And one of the first things I did after getting hired at AOL in 2003 was try to get a grasp of exactly why those expected synergies never happened. There are two great books on the subject, There Must Be a Pony in Here Somewhere: The AOL Time Warner Debacle and the Quest for the Digital Future by Kara Swisher, the journalist who broke the story, intuiting what was going on based on a pattern of AIM messages and log-ins and log-outs by AOL execs. Brilliant journalist, brilliant and engaging book. You could almost hear Kara cheering today when she wrote about the merger, calling it a "bold and definitive move" that is good for both parties.

The second, Stealing Time: Steve Case, Jerry Levin, and the Collapse of AOL Time Warner by Alec Klein (if memory serves, it's been seven years since I read either of them), does a more thorough analysis of the business failures of the merger.

Why the Time Warner Merger Failed

But what both books agreed on was that the deal was upside down: it was the equivalent of a boa constrictor trying to swallow an elephant. Time Warner was bought with AOL shares whose price was hugely inflated thanks, in part, to some creative accounting of advertising sales. Following the acquisition, the pensions of Time Warner employees dived in value, which would have deep-sixed the kind of cooperation required to merge two such different entities even had Time Warner employees seen AOL and the Internet in general as an easy ride into the digital age. But they didn't. They saw AOL as an upstart kid trying to tell adults how their business should be run.

Almost all efforts to merge operations were resisted, mightily, within Time Warner ranks. Major passive aggressive behaviour.

10 Years Later

It's somewhat fitting that the acquisition of HuffPost comes almost exactly 10 years since the AOL Time Warner merger was announced. It's AOL's second chance to create the "synergies" so ballyhooed during the Time Warner merger.

As the pioneer who started the content game on the Web, it would be fitting if AOL, now that it has found an eager bride in HuffPost, will finally make that happen.