Googley Manager and AOL Math

December 18, 2011

Short honk:. I am not watching America Online, now known as AOL. I loaded the dial up program once, noticed the hidden file, and dismissed the company. When AOL snagged Personal Library Software, I took another look and did not see anything that caught my attention. When the Googler Tim Armstrong moved to AOL, I took the position that I would be able to see how the Google method applied to AOL. I think we have some data.

Navigate to “There Is Something Fundamentally Wrong With AOL’s Media Business.” What is the assertion which suggests how well Google management methods work? Here you go:

AOL’s access business generates about $100 million of operating profit per quarter, and
AOL’s search business generates about $75 million of operating profit per quarter.
The access and search businesses together, therefore, generate about $175 million of operating profit per quarter. Importantly, both of these businesses are shrinking fast, and both of their fortunes are tied together. AOL’s access subscribers drive most of its searches, so as the subscribers cancel the service, their searches disappear. So AOL won’t be able to live on the cash flow from these two businesses forever. Anyway, given that AOL’s total operating profit is about $16 million, this suggests that the media business is losing about $160 million per quarter.

Google management methods are not working. “Patch” the system? Tough job. And search? Provided by Google, AOL helps out the Mountain View folks, but the AOL crowd seems to be hunting for a different animal.

Stephen E Arnold, December 18, 2011


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