Time Warner Hunts Head At Google For New AOL Chief
Originally Posted at The Wall Street Journal
Time Warner Inc. announced a leadership overhaul at its AOL unit Thursday, naming Google Inc. Senior Vice President Tim Armstrong to succeed its chairman and chief executive, Randy Falco.
In a move that could be a precursor to a spinoff of all or parts of AOL, Time Warner said Mr. Falco and his No. 2 -- President and Chief Operating Officer Ron Grant -- will leave the company, clearing the way for 37-year-old Mr. Armstrong to take AOL's reins next month.
Mr. Armstrong's vault to AOL is seen as a major coup for the Time Warner unit, which has been limping badly in its efforts to shift to an ad-supported business model under Mr. Falco. Mr. Armstrong said he looked forward to exploring "the right structure and future for AOL."
The reshuffling is the latest in a number of shakeups at AOL. As the unit's performance has soured and its brand faded, Time Warner Chief Executive Jeff Bewkes has flagged a possible spinoff or merger with a rival. Mr. Bewkes spent much of last year attempting to orchestrate a merger with Yahoo Inc., but a deal failed to materialize.
AOL, which saw a 20% slide in total revenue last year, has ushered in several new senior executives, including former Yahoo executive Gregory Coleman last month to succeed Lynda Clarizio as president of its Web advertising division. He became the third top ad sales executive at the company in little more than a year.
Mr. Armstrong's move is a blow to Google, which has lost several senior executives in the past year. The company's senior connection to Madison Avenue, Mr. Armstrong was a member of Google's Operating Committee, the core group of executives who lead the company, and on the front lines of its plans to expand into new advertising formats.
But those efforts have been slow going, despite major acquisitions Mr. Armstrong helped shepherd, and people close to Google have suggested there wasn't much further he could climb.
He considered leaving the company in 2007, according to people familiar with the matter, but stayed after Google CEO Eric Schmidt and others fought hard to keep him.
In a statement Thursday, Mr. Schmidt praised Mr. Armstrong's contributions to Google and said the company would announce an internal candidate as his successor in the coming weeks.
Mr. Armstrong said in an interview that Time Warner came to him in recent weeks to discuss taking over the top job at AOL. He said his first priority is to meet with company employees to better understand the culture, then plot out his strategy for the Internet company.
"They've done a very nice job of growing traffic. They are in a position now to be a major player in all types of Internet- based advertising," he said.
AOL is the fourth-largest Web property behind Google, Yahoo and Microsoft, attracting 108.4 million unique visitors in January, according to comScore.
Pali Research analyst Rich Greenfield said Mr. Armstrong's appointment was a "significant positive" for Time Warner shares, and noted that the only reason an executive of his pedigree would take such a role would be "the ability to manage a public company of his own in the near future."
The overhaul is an admission that AOL's strategy has fallen short of Time Warner's expectations. Mr. Bewkes plucked Mr. Falco from NBC to run AOL in November 2006.
He also dispatched Mr. Grant, a trusted lieutenant, to help reshape the struggling unit, which had become a thorn in Time Warner's side since its disastrous merger in 2001.
Mr. Falco and Mr. Grant couldn't be reached to comment.
While Mr. Falco had little Internet industry experience, Time Warner executives hoped that his cachet with Madison Avenue would help the company in its transition to an ad-supported business.
But Mr. Falco struggled to shake off criticism that he was a television executive who didn't understand the Web.
Mr. Falco attempted to turn around the business with more than $1.6 billion of acquisitions. But AOL is still struggling to digest those acquisitions, against a backdrop of slowing advertising growth and slumping subscription revenue.
