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Tim Armstrong: AOL is Brands & Platforms

Posted on GigaOM

September 30, 2010

This week must count as the best and the worst week for AOL Chief Executive Tim Armstrong. Worst, because a breaking story about AOL's pending acquisition of TechCrunch forced him to get on a cross-country flight to San Francisco—only to head right back to New York, where he was set to make an announcement at an industry event.Still, it was one of the best weeks since he joined, because the TechCrunch acquisition got the world's attention on AOL: The stock jumped nearly 3.2 percent Tuesday, and it was up 3.5 percent Wednesday.

It helped that Armstrong bought two other companies: Brizzly, a San Francisco social media company, and 5Min, a video distribution platform.In total, these three acquisitions cost the company more than $100 million, according to The Wall Street Journal. In between his flights and meetings, Armstrong called me for a brief chat, and we talked about AOL's strategic game plan.

Armstrong's Plan

"Our strategy is to invest in as many brands as we can—brands that cut across devices and distribution channels," he said. From TechCrunch to Engadget to Moviefone, AOL wants to establish brand beachheads on the Internet, Armstrong added.

In addition to brands, he said that AOL wants to establish platforms that can be used by other content companies. The three platforms he has in mind: a communication platform, an advertising platform, and a content platform.

When asked about his company's video strategy, Armstrong played it coy and said the plans will be revealed in time. Tim pointed to the company's recently announced video-serving technology, video-production technology they recently acquired, StudioNow, and now, 5Min.

Brizzly, Armstrong said, was a way for AOL to acquire some top-notch social media talent. Brizzly founders, who include former Googler (GOOG) Jason Shellen, will help sprinkle social pixie dust into various AOL products. "Brizzly is more about talent, and our universal strategy is to make AOL fit into people's social life," Armstrong said. When I asked him why AOL didn't acquire Mashable, a weblog the company has been linked to in the past, he said: "TechCrunch was a clear leader in breaking news and had scale in the category, and we believe in their brand."

More Mergers Ahead?

AOL is a two-tier business model, especially as it starts to distance itself from the fast-dying dial-up business. One arm of AOL focuses on media brands, while the other focuses on building platforms for others.

Brands:

Engadget, Moviefone, MapQuest, TechCrunch

Platforms for Others:

Communication—AIM, AOL Mail

Advertising—Ad.com, Advertising.com, Video Ad-Serving Technology

Video—StudioNow (production), 5Min (distribution), video ad-serving (monetization)

Content Production Platform—Seed, Patch

"For the most part, we are a build-first company," Armstrong said. "We will use [mergers and acquisitions] if we believe that is what is needed and it helps us get brands and helps expand our platforms." While he didn't say as much, I suspect AOL is going to be on the prowl for more small acquisitions that help the company expand its footprint.

One of the biggest concerns I have about AOL (and others like them) is that it's innovating less on advertising. The growth of social commerce and emergence of new mobile devices is going to redefine the very meaning of large-scale advertising. It's precisely the arena where Armstrong and his troops should be focusing their attention.

"The socialization of ads is a trend we are keeping an eye out for," he said. AOL, like others, is looking for ways to scale the opportunities of transactions and at the same time lower the time to transactions. A big acquisition or two in this arena can't be ruled out.

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