The controversy at AOL late last year when several executives left — including much of the management of its web site TechCrunch — still seems to stick in CEO Tim Armstrong’s craw. “There’s a huge misunderstanding about AOL from the drama perspective,” Armstrong told investors this morning at the Barclay’s Internet Connect Conference. “The media loves to write about our company.” Not just the media: Activist investor Jeffrey Smith, whose Starboard Value owns about 5% of AOL, wrote a public letter in December saying that the departures indicated “a high level of frustration inside the Company over its current strategic direction.” Yet Armstrong, whose company owns The Huffington Post, says the story was sensationalized. “People like to make the situation out like the sky is falling.” Even though “there’s a lot of noise about people coming and going” he says that “I have been removing people from the company who were not performing. And that’s OK…The people we’ve removed, their departments are performing better….The world may look at AOL as a lot of drama, but we’re getting results.” Indeed, he says, if reports are accurate that CNN believes social media site Mashable is worth $200M, then “our content business would be one of the most valuable businesses on the Internet.”
He specifically tried to reassure his audience not to worry about AOL’s huge outlays to build Patch, a network of local news sites. “I understand the value of a nickle and I wouldn’t put investors in a situation that I wouldn’t want to be in myself,” Armstrong said. AOL looks carefully at a community’s wealth — as well as metrics such as voting participation and student-teacher ratios — before deciding to cover it. Last year the company began to ramp up its ad sales force, and has already signed up about 82% of the advertising that it collected in all of 2011. He recalls that local newspapers and services such as the Yellow Pages were extremely popular in the period from 1965 to 1999. As a result, he says, “eventually Patch should have strong double digit (profit) margins.” There’s a “need for the product” he says. “We’re trying to figure out how to serve the advertisers well.” ….(new products for Patch) will have a meaningful impact.
Watch on Deadline
Armstrong also talked up the value of AOL’s patent portfolio. He says the company’s 1,000 or so patents are like “beachfront property in East Hampton” recalling that “when we were spinning out of Time Warner this was a huge negotiation.” In answer to the question that investor Warren Buffett once asked about how many puffs are left in the AOL cigar, Armstrong said: “The AOL cigar is a lot longer than people realize, and it has grown.”
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.