January 21, 2019 • 36 mins
The AOL Time Warner arrangement was doomed not long after it was formed. What led to AOL splitting off and where is the company today?
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Episode Transcript
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Speaker 1 (00:04):
Get in touch with technology with tech Stuff from how
Stuff Works dot com. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland. I'm an executive producer with
How Stuff Works, and I heart radio and I love
all things tech. And in our last episode, I traced
how A o L became a dominant player in the
(00:26):
dial up online service provider business, leading to the incredibly
ambitious merger with Time Warner to form a o L.
Time Warner and I talked about how the dot com
crash and the rise of broadband dealt a double whammy
of a blow to the brand new company, making the
merger look like it was premature and wildly too expensive
(00:48):
of a move for both companies, and I ended mentioning
that Steve Case, the last remaining founder of A o L,
stepped down from the board of directors in two thousand five.
But not every ing was dark and dismal for A
o L. In two thousand five, the company was being
eyed with interest by some other big names in the
(01:08):
text sphere. There were stories that both Microsoft and Google
were looking at A o L as a possible acquisition
if they could convince the merged company to break up. Again,
A O L had repositioned itself with a bit of
a renaissance. At the end of two thousand four, many
people were still using lots of A O L's services,
including A O L Instant Messenger and map Quest, which
(01:33):
the company owned. The A O L dot Com website
offered up the content that previously only A O L
subscribers had been able to access, and it was all free. Well,
I mean, it was his ads supported, but you get
what I mean. However, al L was still making some
really big business moves while things were looking uncertain, and
(01:53):
that just made people kind of wonder what was going on.
In two thousand four, the company had agreed to acquire
a startup called Advertising dot Com, Inc. And I'm pretty
sure you can guess what business that company was in
the division We get a rebranding in two thousand thirteen
as A O L Networks, partly to send the message
that services could span across different types of screens, not
(02:17):
just computers, but televisions and phones and other devices. But
executives over at the time Warner side of this company
weren't really head over heels in love with A O L.
Before the merger, A O l's value was estimated to
be somewhere in the two billion dollar range. Yikes. After
(02:38):
the dot com crash, however, that value dropped to five
billion according to some accounts, although honestly most accounts say
the value was closer to twenty billion. But whether it's
five or twenty, both of which are enormous numbers, get
don't get me wrong. Billion is a lot. That's such
(02:58):
a huge drop from two hundred billion. By two thousand five,
the number, according to some sources, had climbed a little bit.
It was moving in the right direction, but still a
fraction of what A O L had been prior to
the merger. At the time of the merger, AOL had
the higher market capitalization between the two companies, but Time
(03:21):
Warner was making way more revenue. So you can look
at this as indicative of the whole dot com problem.
In the first place, you had these internet based companies
that were valued much, much greater than what they could
actually pay off in the They their value was greater
than their worth, and that was really the issue that
(03:43):
led to the dot com bubble bursting in the first place.
The culture clash never settled down between the two companies.
They weren't able to find a good equilibrium. The AOL
executives felt their traditional media counterparts just didn't get how
business on the inner that worked. They were probably right,
but the Time Warner executives saw A O L as
(04:05):
wasteful and filled to the brim with hubris. A company
just was convinced that the way it did things was
the right way, and that it was building a business
on a product that was clearly on the way out,
that being dial up service, and the Time Warner executives
were kind of right. No one was wholly in the
(04:25):
wrong here, other than the fact that this partnership was
wholly in the wrong. In fact, by two thousand three,
just a few years after this merger, A O L.
Time Warner began to drop the A O L part
from its name came to just call itself Time Warner again.
Keep in mind, all L was the company that technically
(04:47):
made the acquisition. It's technically the company that bought Time Warner,
but now the collective entity was casually ignoring the online
part of its identity. In two thousand five, A O
L and tell A Pictures Productions, a division from Warner Brothers,
would create TMZ and If you're not aware of what
(05:08):
that is, consider yourself fortunate. It's a tabloid news website
that's mainly focused on following celebrities around and publishing everything
it can about those celebrities. It has been one of
the more successful properties to come out of the A
O L and Time Warner days. So I'm pretty snarky
about the whole thing. I don't really like TMZ and
(05:31):
the way they do business. However, I cannot deny that
it's been a money maker. It has been very successful,
whether I like it or not. So I mean, you know,
they they're the ones who became really rich on it,
So what do I know. In two thousand and six,
America Online officially changed its name to A O L.
(05:53):
CEO John Miller said that the reason for this change
was that getting America Online would That had been the
old mission of the company, to get America online, so
that's why it called itself America Online. But he said,
the company did that. We've done that already. We achieved
our goal. So this new name indicates the quote expanded
(06:15):
mission to make everyone's online experience better end quote. A
O L had also changed in another way. It changed
from A corporation into a limited liability company. Now they
get into the differences between an LLC and a corporation
in the United States is more than a little beyond
the scope of tech stuff, but it mostly has to
(06:37):
do with how profits and losses are handled, and it
also has to do a lot with how a company
is taxed. So we're not gonna dive into all that.
I'm sure most of you don't really care, and honestly,
it gets pretty dull pretty fast. But the following year,
AOL made another big change. It moved its headquarters, which
(06:58):
had been in Dulles, Virginia ever since the founding of
the company. Now it was going to move to New
York City. It also laid off about two thousand employees,
or about of its entire workforce. This move was largely
to refocus a o L on its advertising business as
the dial up side continued to dwindle, though it was
(07:20):
still generating revenue at that point. This was two thousand seven,
and and just for reference, two thousand seven was also
when Apple introduced the iPhone. So the iPhone comes out,
people are still using dial up modems enough for a
o L's division to be profitable that's not the last
time we'll talk about dial up though. Anyway. A o
l's new headquarters were closer to Time Warner's HQ, and
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it was also much closer to the advertising world in general.
The advertising world in the United States is almost entirely
based out of New York City, so this was putting
a o L close to where the advertising businesses thrived.
AOL also would change CEO s Jonathan Miller, who had
been leading the company up to that point, was replaced
(08:04):
by a guy named Randy Falco. A o L made
some acquisitions, many of which did not turn out so well. So.
For example, in two thousand eight, a o L acquired
a social networking site called Bibo. It's not that well
known in the United States, but it was the second
largest social network in the UK after Facebook. Back in
(08:25):
two thousand and eight. Bibo could boast twenty two million
unique visitors and they spent an average time of forty
minutes a day on the service, which sounds like a
pretty attractive bargain. You can go to an advertiser and say,
I can guarantee you that millions of people are going
to look at this for forty minutes every day, and
(08:46):
you're gonna be able to sell a lot of ads.
So A O L would spend eight hundred fifty million
dollars in cash on this acquisition. So how did it
turn out? Not great at all? Now, you could argue
that Bibo was on the same path of decline that
A O L was as a As broadband was becoming
(09:07):
more popular, A Well's dial up was dwindling. Well, Bibo
was seeing its number of users dwindle. A lot of
them were going to other social networking sites like Facebook.
A O L was not able to capitalize on Bibo
like executives had hoped, So just two years after buying
the company, A o L would sell it to a
(09:27):
digital media investor group called Criterion Capital Partners, and the
price was much lower than the eight hundred fifty million
dollars that A o L had paid for it. They
sold it for ten million. Three years after that, the
original founders of Bibo were able to buy back their
company from this investor group for just one million dollars.
(09:48):
So they sold it for a D fifty million and
then they bought it back for one million. Now that's
all a bit outside the scope of A O L.
But I thought it was an interesting little tidbit, so
I decided to include. Plus it's another way to illustrate
how A o L was still making some pretty questionable choices.
That the merger with Time Warner wasn't an outlier. I
(10:09):
mean it was an outlier in the sense of how
big it was. A hundred sixty billion dollars is an
enormous outlier, but not an outlier in the sense of
making some rash decisions that ultimately didn't pay off. Now
that's also not to say that every purchase A o
L made was inherently bad. A o L bought lots
(10:29):
of companies, dozens of them. In fact, companies like Weblogs Inc.
That owns popular sites like Engadget and the former Joystick.
There was Game Daily that A o L purchased True Vio.
All of those made products or services that faced the public.
A well also bought companies like e Voice, Info Interactive,
(10:51):
and ad Tech. Those were more business oriented ventures, so
not necessarily things that you and I would encounter, but
other enterprises would. And A o L was never afraid
of buying other companies in an effort to remain relevant
or regain relevance, depending upon your point of view, but
things between A O L and Time Warner would get
(11:11):
less stable by the year. The cultures of the two
companies still had not found a good meeting point. In
March two thousand nine, the company replaced CEO Randy Falco.
The new leader for the A O L branch would
be Tim Armstrong. Armstrong was coming from Google, where he
had helped build the company's advertising division into a juggernaut.
(11:35):
At the time, various industry journals reported that Armstrong had
had aspirations of being a CEO of a company, He
just hadn't quite settled on which company he wanted to
go for. According to add Age, his name was one
of the ones that Yahoo was considering when it was
searching for a replacement for their CEO and founder Jerry Yang.
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But A O L would end up being his destination.
And that was just the beginning for the big events
of two thousand nine. I'll explain more in just a second,
but first let's take a quick break to thank our sponsor.
In May two thousand nine, just two months after Tim
(12:19):
Armstrong took the helm of A O L. The tumultuous
pairing of A O L and Time Warner began the
slow march to divorce. Time Warner said it would spin
off A O L as an independent company later that year.
In December of two thousand nine, A O L shares
would begin trading on the floor of the New York
Stock Exchange. Time Warner executives said the reason for the
(12:42):
split was that A O L was more likely to
grow as a separate company than as part of Time Warner,
and that A O L attracted different investors than Time
Warner did. Time Warner would become a more lean and
straightforward company as well, according to the wisdom of the time,
and this was largely true. Time Warner, by the way,
(13:03):
and I'll again have to do a full episode about
this whole thing at some point. They would later spend
off Time Incorporated in two thousand fourteen, and in two
thousand eighteen, A T and T would move to acquire
Time Warner, which is now called Warner Media LLC. By
the time this episode airs, that should be finalized. But
(13:25):
as I'm recording this, there's currently an appeal out on
an earlier court ruling that permitted the mergers. So you
had one court say yeah, that mergers fine, and A T.
And T and Time Warner were ready to make it
a real deal, but then you had an appeal go out,
and that appeal is still being decided as of the
time I'm recording this episode. Between the announcement and the
(13:48):
actual spinoff date, A O L would acquire another company
called Patch Media, and Patch Media oversaw community news websites
so reach local community news. It was also a company
that was co founded by Tim Armstrong, the leader of
A O L. A L would end up investing another
(14:09):
fifty million dollars in Patch in but in the company
announced it would be reducing the number of Patch sites
from nine hundred to six hundred, and also the company
would be laying off staff at all levels of the organization.
Armstrong also famously publicly fired Patches creative director over a
(14:29):
conference call on which all Patch employees were participating. Armstrong
would later apologize for this breach in etiquette. A O
L would spend off Patch and sell off its ownership.
In two thousand fourteen, in A O L purchased tech Crunch,
a tech news site that was founded back in two
(14:50):
thousand five. Tech Crunch is still part of the overall
company that we'll get into how that company has changed
in just a little bit. Also in a o L
bought a young web hosting service called about dot me,
which had launched in October two thousand nine, so it
wasn't even a full year old when a o L
bought it. About dot Me is meant as a sort
(15:12):
of centralized personal web page, and it's meant to coordinate
all the various online points of contact a person might
have in one place. So there are various social media accounts,
email addresses, websites, all that kind of stuff. And that way,
if you went to about dot me and you searched
for me, presumably you would find links to all the
different ways that I have an online presence, and I
(15:34):
can cultivate that, I can decide which ones they share
and which ones they don't, and like Bibo, this acquisition
ended up not being a great fit. Tony Conrad, who
was one of the co founders of about dot me,
was able to buy back majority ownership of the site
from A o L in two thousand thirteen, and it
had been two years and a month since a o
(15:57):
L had bought the company. The detail else of the
two business transactions how much A o L paid for
it and how much Conrad had to pay to get
it back were never made public, but Conrad did tell
The New York Times that he paid a fraction of
what A O L had paid for the company back in.
So once again, a O L buys a company and
(16:18):
then sells it off at a fraction of what it
paid for it once it realizes this wasn't a good
fit after all. It seems to be a pretty common theme.
In two thousand eleven, A O L made another big
media acquisition when it bought The Huffington Post for about
three hundred fifteen million dollars. Arianna Huffington's, the founder of
(16:39):
the Huffington's Post, was named a O L Content Chief,
and she held that position until two thousand sixteen, when
she would step down from A O L to concentrate
on a new startup called Thrive Global. The Huffington's Post
acquisition was in February two thousand eleven. In April two
thousand eleven, A O L would cut nine hundred staff
(17:00):
from The Huffington's Post. Now that included two hundred jobs
in the United States and seven hundred jobs in India.
Tim Armstrong told reporters that the company's goal was to
move toward having s of a o L staff working
in editorial or other content divisions like tech Crunch. The
Huffington Post is still part of the overall company. Armstrong
(17:22):
was guiding a o L to focus more on creating
content and then advertising against that content, and it was
working as recently as Internet subscriptions made up of a
o L's revenue, but with Armstrong's changes, that was shifting
more toward revenue from advertising, which is good because again
(17:44):
the dial up service was not going to increase year
over year. In two thousand thirteen, the company posted its
first revenue gains year over year since two thousand five,
them in the company was finally growing again from revenue.
The company continued its course by acquiring a video ad
company called adapt dot tv for four hundred five million dollars.
(18:07):
It actually was able to pull market share away from
Google this way, and in a o L would post
a one six million dollar profit. Also in al began
to face pressure from investors to make another really big move.
The pressure came from an American hedge fund called Starboard Value.
(18:28):
The organization owns shares and numerous companies, including A two
point four percent ownership of a O L. And it
was using its stake to influence how those companies are run,
which is something shareholders do all the time. You can
vote because of your shares, although the amount of influence
you can exert is based on how many shares you hold.
(18:50):
If you hold one share and a company has millions
of shares out in the market, your vote probably isn't
going to make a whole lot of difference. Starboard is
sometimes called an activist investor because it takes such an
active role in steering the course of the companies that
it invests. In The specific direction that the investors wanted
to push A O L toward was in a merger
(19:12):
with Yahoo. Starboard was similarly putting pressure on Yahoo because
it had steak in Yahoo as well. Spoiler alert, by
the way, those two companies AOL and Yahoo would eventually
be brought together, but not through this method. At the time.
Armstrong would refer to the proposed merger as quote a
dead notion end quote. And then we get to and
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another really big change for A O L. Armstrong had
been leading the company since two thousand nine. His leadership
was marked by both success in the form of guiding
a o L too year over year revenue gains and
some failures like the mess with Patch, but overall a
O L was in much better shape as a standalone
(19:56):
company adapting to the realities of a broadband connected Internet
than it had been when it was under the umbrella
of Time Warner. In two thousand fifteen, another company would
step up to change things, and that company was Verizon.
Verizon is a telecommunications conglomerate that traces its history back
to A T and T. In the eighties, the United
(20:19):
States Justice Department ordered A T and T to break
up the system of companies that had been under the
Bell system. It's named after the Bell Telephone Company, and
ultimately it's named after Alexander Graham Bell. A T and
T was originally one of the companies under the American
Bell Telephone Company, but then A T and T would
go on to acquire the assets of its parent company
(20:41):
and become the new parent company back in eight By
the nineteen eighties, the U. S Government had determined that
the Bell system was a monopoly and ordered A T
and T to break up the system so that there
would be multiple competing companies operating the telephone service Bell
Atlantic was one of the is that was broken up
in this process. Bell Atlantic itself consists of four smaller
(21:05):
telephone companies, or it did at the time, and eventually
Bell Atlantic would become Verizon in two thousand. That was
when Bell Atlantic merged with another telecommunications company called GTE Corporation,
and thus Verizon was born. Verizon acquired A o L
for four point four billion dollars in cash, a huge
(21:26):
amount of money, but a pittance compared to the hundred
sixty billion dollar deal that had taken place between A
O L and Time Warner. Analysts said that Verizon's motivation
was likely fueled by a slowing mobile market. At the
time of the acquisition, Verizon was sitting at number fifteen
on the Fortune five D list. Today it's down to sixteen.
(21:48):
Still still not bad, but success depended heavily on growing
the mobile market, and as more people by mobile phones,
the demand was was decreasing, right there fewer people who
don't have a mobile phone. Grabbing a O L, which
was making real progress in online advertising must have looked
like a pretty sweet deal. But we've seen that before
(22:11):
in this series, haven't we. Where companies have thought, oh,
we'll just get this other company that's already got its
hand in in this industry, and then we can just profit.
So what actually happened, Well, I'll tell you, but first
let's take another quick break to thank our sponsor. Tim
(22:35):
Armstrong stayed in the driver's seat at A O L.
Upon the Verizon acquisition. The company continued to focus on
ad revenues, and it also launched a news service called One.
One represented a unification of a O L's various ad products,
including the ones the company had acquired by buying other companies,
kind of making a central, one stop shop for advertisers.
(22:58):
According to a tech Crunch p on the product, the
idea was that advertisers could use that tool to optimize
campaigns across all of a O L's capabilities, which would
include television, video, web based ads. So you would come
up to A O L and say, I want to
run an advertising campaign about this product. Here's my budget.
How can we make the best use of this so
(23:21):
that we reached the most people. While searching for stories
about A O l that were centered around this particular
time of its history, one thing that jumped out at
me was how many media outlets posted surprise takes on
the fact that in two thousand fifteen, a o L
still had two point one million customers using dial up service.
(23:42):
You know, i'd said back in two thousand seven that
was still having you know, millions of people. Two thousand fifteen,
still two point one million people using dial up. Now,
the surprise that the media reacted with strikes me as
a little elitist. Actually, it strikes me as a lot elitist,
because it can be very easy for people like me,
(24:05):
someone who lives in a large city, or at least
a decent sized city, to forget that broadband penetration isn't
uniform throughout the United States. There's still some areas that
have very limited broadband support. And then not everyone is
using the internet to watch episodes of Stranger Things or
download the latest Red Dead Redemption game. Some people, uh,
(24:27):
maybe they're older, and maybe they have less experience with technology.
A o L represents something they're comfortable using, they know
how it works. They're not ready to move over to
something else. So it's no surprise that there's still customers there. Uh,
that there are two million, Maybe that's surprising, but that
was the case at least in two thousand fifteen. The
(24:49):
last time I saw a report on this was dated
two thousand seventeen and the number had not changed. It's
still it's still said two point one million subscribers. So
I don't know if that those two thousand seventeen reports
were based on the exact same information that just hadn't
been updated. In two thousand sixteen, Verizon announced that it
intended to acquire Yahoo, more specifically Yahoo's Internet assets, because
(25:14):
the company is another big, big company, and some of
Yahoo was tied up in investments with Ali Baba. That
part of Yahoo would be renamed out Baba, so that
part would not be picked up by Verizon. Verizon would
just pick up the Internet part of Yah Who's business.
So now that desire to bring a O L and
(25:36):
Yahoo together could finally come true. It wasn't through a
merger directly between AOL and Yahoo. It was from a
third company buying both of those properties. Now, the deal
was for four point four eight billion dollars to buy Yahoo.
It was not a smooth process. Yeah Who was a
(25:56):
troubled company. It had been struggling to remain relevant over
the past several years, and just months after Verizon and
Yahoo had announced this upcoming deal, this this planned acquisition,
Yahoo revealed that it had been the target of hackers
and that a serious data breach, I'm talking one of
(26:20):
the biggest data breaches of all time had taken place,
affecting potentially five hundred million people half a billion people.
The deal somehow stayed in place even in the wake
of that announcement. It did get marked down because originally
the deal was for four point eight billion dollars. They
(26:42):
marked off about three fifty million dollars off of it
upon the completion of the deal. A year later, Marissa Meyer,
who was the CEO of Yahoo she had come over
from Google, resigned. Tim Armstrong would head up this combined
company of A O L and Yahoo. Tim Armstrong would
head up the combined company of A O L and Yahoo,
(27:03):
and that combined company got a new name. It was
called and still is both O A T. H, a
name that a lot of people met with Ye Anyway.
The deal would also mean layoffs, frequently that does happen
with mergers. The Washington Post reported that two thousand former
(27:25):
Yahoo or A O L employees would lose their jobs
as these two businesses merged, and the various departments were reorganized,
and while the Yahoo acquisition was slowly developing, before it
had become finalized, a o L was still buying stuff
in the company purchased a content company called Riot r
(27:45):
y O T. That's a company that makes specialty films
and documentaries for formats like VR or three D sixty
degree film, and Tim Armstrong would hire a guy named
k Guru gol Roppin as the chief operating officer of
OATH He had been a global managing director with Ali Baba,
(28:06):
and while Armstrong didn't know it, he had also just
hired his own replacement. According to various news stories, Armstrong
had wanted to convince Verizon to spin off OATH as
its own independent company, sort of the same way that
Time Warner had spun off A o L a decade earlier.
(28:26):
Then Armstrong would be heading up a really big content
and advertising company with powerful assets, free to pursue its
own businesses, not tied down to Verizon. But Verizon's leadership
never really saw eye to eye on that vision. Lowell McAdams,
who was the CEO of Verizon, announced in June of
(28:50):
that he was going to step down. He led the
company precisely for seven years. He stepped down on his
seventh anniversary of taking the CEO position over at Verizon,
so he steps down. His replacement was the guy who
had been the ct O of Verizon, Hans Vestberg. Hans
Vestberg had previously been the CEO of Ericsson. Well after
(29:14):
the transition, Vestberg decides to reorganize Oath, and Armstrong saw
much of his responsibilities stripped away and handed over to
Go Roppin. And so in September two eighteen, Armstrong announces
he's resigning from Oath and Go Robin then took the
helm of Oath. He becomes the new CEO of the company.
(29:37):
Thus Armstrong had hired his own replacement. Now the day
that I record this, which is in December two eighteen,
Oath is in the news again. Verizon filed papers with
the Security Exchange Commission the SEC. Two. This is something
that all publicly traded companies have to do. They have
to file paperwork with the SEC to let them know
(30:00):
about things like how much money they make. It's a
transparency thing. So in this filing, the Verizon has written
off four point six billion dollars pre tax, and that
right off is the result of Verizon buying Yahoo and
A A O L. And then realizing that apparently these
(30:21):
companies are actually worth less than what Verizon had paid
for them. Essentially, they overpaid for those companies and they
need to write off four point six billion dollars because
of the the shortfall here. So once again we get
this very familiar story. One it seems like history really
(30:42):
is repeating itself. Vesperg doesn't seem terribly interested in the
media side of Verizon's business, and by that I mean Oath,
So right now it looks a little grim in the
short term for people who work at Oath. Verizon is
offering up a voluntary separation pro Graham. That's a nice
way of saying, we need we need some of you
(31:04):
guys to leave. We need a lot of you guys
to leave, and we're offering up a package. If you
take this package, you're gonna get some compensation, You're gonna
get some severance pay uh, And we don't have to
have the pain of going through a list and deciding
who we're going to lay off. So this is to
try and take as many of those people out of
the decision making process of who do lay off as possible.
(31:28):
But if they don't meet the goal for the number
of people who depart, they will start laying off employees.
The estimate right now is that the company expects to
shed ten thousand, four hundred employees total. This is all
a Verizon, not necessarily just from Oath. By June two
thousand nineteen. As for OATH specifically and that filing, Verizon
(31:52):
said that the company quote has experienced increased competitive and
market pressures throughout two thousand eighteen that have resulted in
lower than expected revenues and earnings. These pressures are expected
to continue and have resulted in a loss of market
positioning to our competitors in the digital advertising business end quote.
(32:13):
So in other words, what it's sort of saying is, Hey,
those guys who are in charge earlier, you know, not us,
but those other guys who used to lead the company.
They thought we were going to do way better than
what we actually are doing right now. But they weren't
able to anticipate the market conditions or how well our
competitors were going to do. But we, you know, the
(32:35):
new guys who are in charge now we have to
deal with the mess that they left, and we also
understand it's going to be really tough over the next
few years. That's essentially what their filing says. And it's
a warning this that says, don't expect us to turn
this around overnight. So what is going to happen next
(32:56):
for oaths, or specifically to a o L. That's something
of an open question as I record this episode, and
maybe by the time you hear it it will have
been answered it. Maybe that Verizon will decide to spin
off the company after all, because Vestberg doesn't really seem
all that interested in developing a media company. It's not
(33:18):
likely to go away because the company still does generate revenue.
It's not like it's hemorrhaging money left and right. It's
just not the transformative property that Verizon was hoping it
would be when it made the acquisition, which again, I
think you could argue convincingly would be the full history
of a o L. Baron's, by the way, has an
article that cites Wells Fargo analyst Jennifer Fritzscha and she
(33:42):
wrote that quote, the hype of OATH has been over
for some time. While we believed in the white board
concept of OATH offering a new digital advertiser of choice,
beyond Google and Facebook. We think this has been an
uphell fight for Verizon without a significant amount of gale
and content ownership end quote. And that's the story of
(34:05):
a o L so far, from a startup in the
nineteen eighties that provided a bulletin board like service to
Commodore sixty four users all the way up to a
cog in an enormous multibillion dollar global corporate machine that's
giving off a little smoke at the moment. The upcoming
departures and layoffs will likely mean things will continue to
(34:27):
change for folks over at a o L. But hopefully
those who are working in the content side will continue
to have gainful employment. As someone who creates stuff for
the internet, podcasts, the occasional article. I feel a lot
of empathy for people who work at other companies that
go through these big changes. I've gone through changes like
(34:48):
that multiple times myself. I've been very fortunate so far,
but you can't take that for granted. Those things can
really shake things up, and it's it's a huge impact
on the lives of old people. So I hope it
turns out for the best for everybody concern. That is
the conclusion of the a o L story so far,
(35:10):
America Online probably has several years left in its history.
I sure hope it does. I hope it doesn't just
go away, so I'll probably have to do an update
a follow up episode at some point in the future.
But this was a really fascinating story to look into,
very complicated from a business perspective, but interesting and and
(35:30):
connected to so many other companies, whether directly through mergers
and acquisitions or through competition. If you guys have any
suggestions for future episodes of tech Stuff, maybe it's a technology,
maybe it's another company story you would like to hear about.
Maybe there's someone I should interview. Why not let me
know send me an email. The email address for the
(35:51):
show is tech Stuff at how stuff works dot com
or head on over to tech Stuff podcast dot com.
That's our website. You got to find other ways to
contact me through there. Like on social media, you also
find information about the show. You'll see a link to
our merchandise page over at t public dot com slash
tech stuff. That's where you can buy all sorts of
(36:12):
goodies with the tech Stuff logo and various designs on it.
Every purchase you make goes to help the show and
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soon for more on this and thousands of other topics.
Is It, how stuff Works dot com
Get in touch with technology with tech Stuff from how
Stuff Works dot com. Hey there, and welcome to tech Stuff.
I'm your host, Jonathan Strickland. I'm an executive producer with
How Stuff Works, and I heart radio and I love
all things tech. And in our last episode, I traced
how A o L became a dominant player in the
(00:26):
dial up online service provider business, leading to the incredibly
ambitious merger with Time Warner to form a o L.
Time Warner and I talked about how the dot com
crash and the rise of broadband dealt a double whammy
of a blow to the brand new company, making the
merger look like it was premature and wildly too expensive
(00:48):
of a move for both companies, and I ended mentioning
that Steve Case, the last remaining founder of A o L,
stepped down from the board of directors in two thousand five.
But not every ing was dark and dismal for A
o L. In two thousand five, the company was being
eyed with interest by some other big names in the
(01:08):
text sphere. There were stories that both Microsoft and Google
were looking at A o L as a possible acquisition
if they could convince the merged company to break up. Again,
A O L had repositioned itself with a bit of
a renaissance. At the end of two thousand four, many
people were still using lots of A O L's services,
including A O L Instant Messenger and map Quest, which
(01:33):
the company owned. The A O L dot Com website
offered up the content that previously only A O L
subscribers had been able to access, and it was all free. Well,
I mean, it was his ads supported, but you get
what I mean. However, al L was still making some
really big business moves while things were looking uncertain, and
(01:53):
that just made people kind of wonder what was going on.
In two thousand four, the company had agreed to acquire
a startup called Advertising dot Com, Inc. And I'm pretty
sure you can guess what business that company was in
the division We get a rebranding in two thousand thirteen
as A O L Networks, partly to send the message
that services could span across different types of screens, not
(02:17):
just computers, but televisions and phones and other devices. But
executives over at the time Warner side of this company
weren't really head over heels in love with A O L.
Before the merger, A O l's value was estimated to
be somewhere in the two billion dollar range. Yikes. After
(02:38):
the dot com crash, however, that value dropped to five
billion according to some accounts, although honestly most accounts say
the value was closer to twenty billion. But whether it's
five or twenty, both of which are enormous numbers, get
don't get me wrong. Billion is a lot. That's such
(02:58):
a huge drop from two hundred billion. By two thousand five,
the number, according to some sources, had climbed a little bit.
It was moving in the right direction, but still a
fraction of what A O L had been prior to
the merger. At the time of the merger, AOL had
the higher market capitalization between the two companies, but Time
(03:21):
Warner was making way more revenue. So you can look
at this as indicative of the whole dot com problem.
In the first place, you had these internet based companies
that were valued much, much greater than what they could
actually pay off in the They their value was greater
than their worth, and that was really the issue that
(03:43):
led to the dot com bubble bursting in the first place.
The culture clash never settled down between the two companies.
They weren't able to find a good equilibrium. The AOL
executives felt their traditional media counterparts just didn't get how
business on the inner that worked. They were probably right,
but the Time Warner executives saw A O L as
(04:05):
wasteful and filled to the brim with hubris. A company
just was convinced that the way it did things was
the right way, and that it was building a business
on a product that was clearly on the way out,
that being dial up service, and the Time Warner executives
were kind of right. No one was wholly in the
(04:25):
wrong here, other than the fact that this partnership was
wholly in the wrong. In fact, by two thousand three,
just a few years after this merger, A O L.
Time Warner began to drop the A O L part
from its name came to just call itself Time Warner again.
Keep in mind, all L was the company that technically
(04:47):
made the acquisition. It's technically the company that bought Time Warner,
but now the collective entity was casually ignoring the online
part of its identity. In two thousand five, A O
L and tell A Pictures Productions, a division from Warner Brothers,
would create TMZ and If you're not aware of what
(05:08):
that is, consider yourself fortunate. It's a tabloid news website
that's mainly focused on following celebrities around and publishing everything
it can about those celebrities. It has been one of
the more successful properties to come out of the A
O L and Time Warner days. So I'm pretty snarky
about the whole thing. I don't really like TMZ and
(05:31):
the way they do business. However, I cannot deny that
it's been a money maker. It has been very successful,
whether I like it or not. So I mean, you know,
they they're the ones who became really rich on it,
So what do I know. In two thousand and six,
America Online officially changed its name to A O L.
(05:53):
CEO John Miller said that the reason for this change
was that getting America Online would That had been the
old mission of the company, to get America online, so
that's why it called itself America Online. But he said,
the company did that. We've done that already. We achieved
our goal. So this new name indicates the quote expanded
(06:15):
mission to make everyone's online experience better end quote. A
O L had also changed in another way. It changed
from A corporation into a limited liability company. Now they
get into the differences between an LLC and a corporation
in the United States is more than a little beyond
the scope of tech stuff, but it mostly has to
(06:37):
do with how profits and losses are handled, and it
also has to do a lot with how a company
is taxed. So we're not gonna dive into all that.
I'm sure most of you don't really care, and honestly,
it gets pretty dull pretty fast. But the following year,
AOL made another big change. It moved its headquarters, which
(06:58):
had been in Dulles, Virginia ever since the founding of
the company. Now it was going to move to New
York City. It also laid off about two thousand employees,
or about of its entire workforce. This move was largely
to refocus a o L on its advertising business as
the dial up side continued to dwindle, though it was
(07:20):
still generating revenue at that point. This was two thousand seven,
and and just for reference, two thousand seven was also
when Apple introduced the iPhone. So the iPhone comes out,
people are still using dial up modems enough for a
o L's division to be profitable that's not the last
time we'll talk about dial up though. Anyway. A o
l's new headquarters were closer to Time Warner's HQ, and
(07:42):
it was also much closer to the advertising world in general.
The advertising world in the United States is almost entirely
based out of New York City, so this was putting
a o L close to where the advertising businesses thrived.
AOL also would change CEO s Jonathan Miller, who had
been leading the company up to that point, was replaced
(08:04):
by a guy named Randy Falco. A o L made
some acquisitions, many of which did not turn out so well. So.
For example, in two thousand eight, a o L acquired
a social networking site called Bibo. It's not that well
known in the United States, but it was the second
largest social network in the UK after Facebook. Back in
(08:25):
two thousand and eight. Bibo could boast twenty two million
unique visitors and they spent an average time of forty
minutes a day on the service, which sounds like a
pretty attractive bargain. You can go to an advertiser and say,
I can guarantee you that millions of people are going
to look at this for forty minutes every day, and
(08:46):
you're gonna be able to sell a lot of ads.
So A O L would spend eight hundred fifty million
dollars in cash on this acquisition. So how did it
turn out? Not great at all? Now, you could argue
that Bibo was on the same path of decline that
A O L was as a As broadband was becoming
(09:07):
more popular, A Well's dial up was dwindling. Well, Bibo
was seeing its number of users dwindle. A lot of
them were going to other social networking sites like Facebook.
A O L was not able to capitalize on Bibo
like executives had hoped, So just two years after buying
the company, A o L would sell it to a
(09:27):
digital media investor group called Criterion Capital Partners, and the
price was much lower than the eight hundred fifty million
dollars that A o L had paid for it. They
sold it for ten million. Three years after that, the
original founders of Bibo were able to buy back their
company from this investor group for just one million dollars.
(09:48):
So they sold it for a D fifty million and
then they bought it back for one million. Now that's
all a bit outside the scope of A O L.
But I thought it was an interesting little tidbit, so
I decided to include. Plus it's another way to illustrate
how A o L was still making some pretty questionable choices.
That the merger with Time Warner wasn't an outlier. I
(10:09):
mean it was an outlier in the sense of how
big it was. A hundred sixty billion dollars is an
enormous outlier, but not an outlier in the sense of
making some rash decisions that ultimately didn't pay off. Now
that's also not to say that every purchase A o
L made was inherently bad. A o L bought lots
(10:29):
of companies, dozens of them. In fact, companies like Weblogs Inc.
That owns popular sites like Engadget and the former Joystick.
There was Game Daily that A o L purchased True Vio.
All of those made products or services that faced the public.
A well also bought companies like e Voice, Info Interactive,
(10:51):
and ad Tech. Those were more business oriented ventures, so
not necessarily things that you and I would encounter, but
other enterprises would. And A o L was never afraid
of buying other companies in an effort to remain relevant
or regain relevance, depending upon your point of view, but
things between A O L and Time Warner would get
(11:11):
less stable by the year. The cultures of the two
companies still had not found a good meeting point. In
March two thousand nine, the company replaced CEO Randy Falco.
The new leader for the A O L branch would
be Tim Armstrong. Armstrong was coming from Google, where he
had helped build the company's advertising division into a juggernaut.
(11:35):
At the time, various industry journals reported that Armstrong had
had aspirations of being a CEO of a company, He
just hadn't quite settled on which company he wanted to
go for. According to add Age, his name was one
of the ones that Yahoo was considering when it was
searching for a replacement for their CEO and founder Jerry Yang.
(11:57):
But A O L would end up being his destination.
And that was just the beginning for the big events
of two thousand nine. I'll explain more in just a second,
but first let's take a quick break to thank our sponsor.
In May two thousand nine, just two months after Tim
(12:19):
Armstrong took the helm of A O L. The tumultuous
pairing of A O L and Time Warner began the
slow march to divorce. Time Warner said it would spin
off A O L as an independent company later that year.
In December of two thousand nine, A O L shares
would begin trading on the floor of the New York
Stock Exchange. Time Warner executives said the reason for the
(12:42):
split was that A O L was more likely to
grow as a separate company than as part of Time Warner,
and that A O L attracted different investors than Time
Warner did. Time Warner would become a more lean and
straightforward company as well, according to the wisdom of the time,
and this was largely true. Time Warner, by the way,
(13:03):
and I'll again have to do a full episode about
this whole thing at some point. They would later spend
off Time Incorporated in two thousand fourteen, and in two
thousand eighteen, A T and T would move to acquire
Time Warner, which is now called Warner Media LLC. By
the time this episode airs, that should be finalized. But
(13:25):
as I'm recording this, there's currently an appeal out on
an earlier court ruling that permitted the mergers. So you
had one court say yeah, that mergers fine, and A T.
And T and Time Warner were ready to make it
a real deal, but then you had an appeal go out,
and that appeal is still being decided as of the
time I'm recording this episode. Between the announcement and the
(13:48):
actual spinoff date, A O L would acquire another company
called Patch Media, and Patch Media oversaw community news websites
so reach local community news. It was also a company
that was co founded by Tim Armstrong, the leader of
A O L. A L would end up investing another
(14:09):
fifty million dollars in Patch in but in the company
announced it would be reducing the number of Patch sites
from nine hundred to six hundred, and also the company
would be laying off staff at all levels of the organization.
Armstrong also famously publicly fired Patches creative director over a
(14:29):
conference call on which all Patch employees were participating. Armstrong
would later apologize for this breach in etiquette. A O
L would spend off Patch and sell off its ownership.
In two thousand fourteen, in A O L purchased tech Crunch,
a tech news site that was founded back in two
(14:50):
thousand five. Tech Crunch is still part of the overall
company that we'll get into how that company has changed
in just a little bit. Also in a o L
bought a young web hosting service called about dot me,
which had launched in October two thousand nine, so it
wasn't even a full year old when a o L
bought it. About dot Me is meant as a sort
(15:12):
of centralized personal web page, and it's meant to coordinate
all the various online points of contact a person might
have in one place. So there are various social media accounts,
email addresses, websites, all that kind of stuff. And that way,
if you went to about dot me and you searched
for me, presumably you would find links to all the
different ways that I have an online presence, and I
(15:34):
can cultivate that, I can decide which ones they share
and which ones they don't, and like Bibo, this acquisition
ended up not being a great fit. Tony Conrad, who
was one of the co founders of about dot me,
was able to buy back majority ownership of the site
from A o L in two thousand thirteen, and it
had been two years and a month since a o
(15:57):
L had bought the company. The detail else of the
two business transactions how much A o L paid for
it and how much Conrad had to pay to get
it back were never made public, but Conrad did tell
The New York Times that he paid a fraction of
what A O L had paid for the company back in.
So once again, a O L buys a company and
(16:18):
then sells it off at a fraction of what it
paid for it once it realizes this wasn't a good
fit after all. It seems to be a pretty common theme.
In two thousand eleven, A O L made another big
media acquisition when it bought The Huffington Post for about
three hundred fifteen million dollars. Arianna Huffington's, the founder of
(16:39):
the Huffington's Post, was named a O L Content Chief,
and she held that position until two thousand sixteen, when
she would step down from A O L to concentrate
on a new startup called Thrive Global. The Huffington's Post
acquisition was in February two thousand eleven. In April two
thousand eleven, A O L would cut nine hundred staff
(17:00):
from The Huffington's Post. Now that included two hundred jobs
in the United States and seven hundred jobs in India.
Tim Armstrong told reporters that the company's goal was to
move toward having s of a o L staff working
in editorial or other content divisions like tech Crunch. The
Huffington Post is still part of the overall company. Armstrong
(17:22):
was guiding a o L to focus more on creating
content and then advertising against that content, and it was
working as recently as Internet subscriptions made up of a
o L's revenue, but with Armstrong's changes, that was shifting
more toward revenue from advertising, which is good because again
(17:44):
the dial up service was not going to increase year
over year. In two thousand thirteen, the company posted its
first revenue gains year over year since two thousand five,
them in the company was finally growing again from revenue.
The company continued its course by acquiring a video ad
company called adapt dot tv for four hundred five million dollars.
(18:07):
It actually was able to pull market share away from
Google this way, and in a o L would post
a one six million dollar profit. Also in al began
to face pressure from investors to make another really big move.
The pressure came from an American hedge fund called Starboard Value.
(18:28):
The organization owns shares and numerous companies, including A two
point four percent ownership of a O L. And it
was using its stake to influence how those companies are run,
which is something shareholders do all the time. You can
vote because of your shares, although the amount of influence
you can exert is based on how many shares you hold.
(18:50):
If you hold one share and a company has millions
of shares out in the market, your vote probably isn't
going to make a whole lot of difference. Starboard is
sometimes called an activist investor because it takes such an
active role in steering the course of the companies that
it invests. In The specific direction that the investors wanted
to push A O L toward was in a merger
(19:12):
with Yahoo. Starboard was similarly putting pressure on Yahoo because
it had steak in Yahoo as well. Spoiler alert, by
the way, those two companies AOL and Yahoo would eventually
be brought together, but not through this method. At the time.
Armstrong would refer to the proposed merger as quote a
dead notion end quote. And then we get to and
(19:36):
another really big change for A O L. Armstrong had
been leading the company since two thousand nine. His leadership
was marked by both success in the form of guiding
a o L too year over year revenue gains and
some failures like the mess with Patch, but overall a
O L was in much better shape as a standalone
(19:56):
company adapting to the realities of a broadband connected Internet
than it had been when it was under the umbrella
of Time Warner. In two thousand fifteen, another company would
step up to change things, and that company was Verizon.
Verizon is a telecommunications conglomerate that traces its history back
to A T and T. In the eighties, the United
(20:19):
States Justice Department ordered A T and T to break
up the system of companies that had been under the
Bell system. It's named after the Bell Telephone Company, and
ultimately it's named after Alexander Graham Bell. A T and
T was originally one of the companies under the American
Bell Telephone Company, but then A T and T would
go on to acquire the assets of its parent company
(20:41):
and become the new parent company back in eight By
the nineteen eighties, the U. S Government had determined that
the Bell system was a monopoly and ordered A T
and T to break up the system so that there
would be multiple competing companies operating the telephone service Bell
Atlantic was one of the is that was broken up
in this process. Bell Atlantic itself consists of four smaller
(21:05):
telephone companies, or it did at the time, and eventually
Bell Atlantic would become Verizon in two thousand. That was
when Bell Atlantic merged with another telecommunications company called GTE Corporation,
and thus Verizon was born. Verizon acquired A o L
for four point four billion dollars in cash, a huge
(21:26):
amount of money, but a pittance compared to the hundred
sixty billion dollar deal that had taken place between A
O L and Time Warner. Analysts said that Verizon's motivation
was likely fueled by a slowing mobile market. At the
time of the acquisition, Verizon was sitting at number fifteen
on the Fortune five D list. Today it's down to sixteen.
(21:48):
Still still not bad, but success depended heavily on growing
the mobile market, and as more people by mobile phones,
the demand was was decreasing, right there fewer people who
don't have a mobile phone. Grabbing a O L, which
was making real progress in online advertising must have looked
like a pretty sweet deal. But we've seen that before
(22:11):
in this series, haven't we. Where companies have thought, oh,
we'll just get this other company that's already got its
hand in in this industry, and then we can just profit.
So what actually happened, Well, I'll tell you, but first
let's take another quick break to thank our sponsor. Tim
(22:35):
Armstrong stayed in the driver's seat at A O L.
Upon the Verizon acquisition. The company continued to focus on
ad revenues, and it also launched a news service called One.
One represented a unification of a O L's various ad products,
including the ones the company had acquired by buying other companies,
kind of making a central, one stop shop for advertisers.
(22:58):
According to a tech Crunch p on the product, the
idea was that advertisers could use that tool to optimize
campaigns across all of a O L's capabilities, which would
include television, video, web based ads. So you would come
up to A O L and say, I want to
run an advertising campaign about this product. Here's my budget.
How can we make the best use of this so
(23:21):
that we reached the most people. While searching for stories
about A O l that were centered around this particular
time of its history, one thing that jumped out at
me was how many media outlets posted surprise takes on
the fact that in two thousand fifteen, a o L
still had two point one million customers using dial up service.
(23:42):
You know, i'd said back in two thousand seven that
was still having you know, millions of people. Two thousand fifteen,
still two point one million people using dial up. Now,
the surprise that the media reacted with strikes me as
a little elitist. Actually, it strikes me as a lot elitist,
because it can be very easy for people like me,
(24:05):
someone who lives in a large city, or at least
a decent sized city, to forget that broadband penetration isn't
uniform throughout the United States. There's still some areas that
have very limited broadband support. And then not everyone is
using the internet to watch episodes of Stranger Things or
download the latest Red Dead Redemption game. Some people, uh,
(24:27):
maybe they're older, and maybe they have less experience with technology.
A o L represents something they're comfortable using, they know
how it works. They're not ready to move over to
something else. So it's no surprise that there's still customers there. Uh,
that there are two million, Maybe that's surprising, but that
was the case at least in two thousand fifteen. The
(24:49):
last time I saw a report on this was dated
two thousand seventeen and the number had not changed. It's
still it's still said two point one million subscribers. So
I don't know if that those two thousand seventeen reports
were based on the exact same information that just hadn't
been updated. In two thousand sixteen, Verizon announced that it
intended to acquire Yahoo, more specifically Yahoo's Internet assets, because
(25:14):
the company is another big, big company, and some of
Yahoo was tied up in investments with Ali Baba. That
part of Yahoo would be renamed out Baba, so that
part would not be picked up by Verizon. Verizon would
just pick up the Internet part of Yah Who's business.
So now that desire to bring a O L and
(25:36):
Yahoo together could finally come true. It wasn't through a
merger directly between AOL and Yahoo. It was from a
third company buying both of those properties. Now, the deal
was for four point four eight billion dollars to buy Yahoo.
It was not a smooth process. Yeah Who was a
(25:56):
troubled company. It had been struggling to remain relevant over
the past several years, and just months after Verizon and
Yahoo had announced this upcoming deal, this this planned acquisition,
Yahoo revealed that it had been the target of hackers
and that a serious data breach, I'm talking one of
(26:20):
the biggest data breaches of all time had taken place,
affecting potentially five hundred million people half a billion people.
The deal somehow stayed in place even in the wake
of that announcement. It did get marked down because originally
the deal was for four point eight billion dollars. They
(26:42):
marked off about three fifty million dollars off of it
upon the completion of the deal. A year later, Marissa Meyer,
who was the CEO of Yahoo she had come over
from Google, resigned. Tim Armstrong would head up this combined
company of A O L and Yahoo. Tim Armstrong would
head up the combined company of A O L and Yahoo,
(27:03):
and that combined company got a new name. It was
called and still is both O A T. H, a
name that a lot of people met with Ye Anyway.
The deal would also mean layoffs, frequently that does happen
with mergers. The Washington Post reported that two thousand former
(27:25):
Yahoo or A O L employees would lose their jobs
as these two businesses merged, and the various departments were reorganized,
and while the Yahoo acquisition was slowly developing, before it
had become finalized, a o L was still buying stuff
in the company purchased a content company called Riot r
(27:45):
y O T. That's a company that makes specialty films
and documentaries for formats like VR or three D sixty
degree film, and Tim Armstrong would hire a guy named
k Guru gol Roppin as the chief operating officer of
OATH He had been a global managing director with Ali Baba,
(28:06):
and while Armstrong didn't know it, he had also just
hired his own replacement. According to various news stories, Armstrong
had wanted to convince Verizon to spin off OATH as
its own independent company, sort of the same way that
Time Warner had spun off A o L a decade earlier.
(28:26):
Then Armstrong would be heading up a really big content
and advertising company with powerful assets, free to pursue its
own businesses, not tied down to Verizon. But Verizon's leadership
never really saw eye to eye on that vision. Lowell McAdams,
who was the CEO of Verizon, announced in June of
(28:50):
that he was going to step down. He led the
company precisely for seven years. He stepped down on his
seventh anniversary of taking the CEO position over at Verizon,
so he steps down. His replacement was the guy who
had been the ct O of Verizon, Hans Vestberg. Hans
Vestberg had previously been the CEO of Ericsson. Well after
(29:14):
the transition, Vestberg decides to reorganize Oath, and Armstrong saw
much of his responsibilities stripped away and handed over to
Go Roppin. And so in September two eighteen, Armstrong announces
he's resigning from Oath and Go Robin then took the
helm of Oath. He becomes the new CEO of the company.
(29:37):
Thus Armstrong had hired his own replacement. Now the day
that I record this, which is in December two eighteen,
Oath is in the news again. Verizon filed papers with
the Security Exchange Commission the SEC. Two. This is something
that all publicly traded companies have to do. They have
to file paperwork with the SEC to let them know
(30:00):
about things like how much money they make. It's a
transparency thing. So in this filing, the Verizon has written
off four point six billion dollars pre tax, and that
right off is the result of Verizon buying Yahoo and
A A O L. And then realizing that apparently these
(30:21):
companies are actually worth less than what Verizon had paid
for them. Essentially, they overpaid for those companies and they
need to write off four point six billion dollars because
of the the shortfall here. So once again we get
this very familiar story. One it seems like history really
(30:42):
is repeating itself. Vesperg doesn't seem terribly interested in the
media side of Verizon's business, and by that I mean Oath,
So right now it looks a little grim in the
short term for people who work at Oath. Verizon is
offering up a voluntary separation pro Graham. That's a nice
way of saying, we need we need some of you
(31:04):
guys to leave. We need a lot of you guys
to leave, and we're offering up a package. If you
take this package, you're gonna get some compensation, You're gonna
get some severance pay uh, And we don't have to
have the pain of going through a list and deciding
who we're going to lay off. So this is to
try and take as many of those people out of
the decision making process of who do lay off as possible.
(31:28):
But if they don't meet the goal for the number
of people who depart, they will start laying off employees.
The estimate right now is that the company expects to
shed ten thousand, four hundred employees total. This is all
a Verizon, not necessarily just from Oath. By June two
thousand nineteen. As for OATH specifically and that filing, Verizon
(31:52):
said that the company quote has experienced increased competitive and
market pressures throughout two thousand eighteen that have resulted in
lower than expected revenues and earnings. These pressures are expected
to continue and have resulted in a loss of market
positioning to our competitors in the digital advertising business end quote.
(32:13):
So in other words, what it's sort of saying is, Hey,
those guys who are in charge earlier, you know, not us,
but those other guys who used to lead the company.
They thought we were going to do way better than
what we actually are doing right now. But they weren't
able to anticipate the market conditions or how well our
competitors were going to do. But we, you know, the
(32:35):
new guys who are in charge now we have to
deal with the mess that they left, and we also
understand it's going to be really tough over the next
few years. That's essentially what their filing says. And it's
a warning this that says, don't expect us to turn
this around overnight. So what is going to happen next
(32:56):
for oaths, or specifically to a o L. That's something
of an open question as I record this episode, and
maybe by the time you hear it it will have
been answered it. Maybe that Verizon will decide to spin
off the company after all, because Vestberg doesn't really seem
all that interested in developing a media company. It's not
(33:18):
likely to go away because the company still does generate revenue.
It's not like it's hemorrhaging money left and right. It's
just not the transformative property that Verizon was hoping it
would be when it made the acquisition, which again, I
think you could argue convincingly would be the full history
of a o L. Baron's, by the way, has an
article that cites Wells Fargo analyst Jennifer Fritzscha and she
(33:42):
wrote that quote, the hype of OATH has been over
for some time. While we believed in the white board
concept of OATH offering a new digital advertiser of choice,
beyond Google and Facebook. We think this has been an
uphell fight for Verizon without a significant amount of gale
and content ownership end quote. And that's the story of
(34:05):
a o L so far, from a startup in the
nineteen eighties that provided a bulletin board like service to
Commodore sixty four users all the way up to a
cog in an enormous multibillion dollar global corporate machine that's
giving off a little smoke at the moment. The upcoming
departures and layoffs will likely mean things will continue to
(34:27):
change for folks over at a o L. But hopefully
those who are working in the content side will continue
to have gainful employment. As someone who creates stuff for
the internet, podcasts, the occasional article. I feel a lot
of empathy for people who work at other companies that
go through these big changes. I've gone through changes like
(34:48):
that multiple times myself. I've been very fortunate so far,
but you can't take that for granted. Those things can
really shake things up, and it's it's a huge impact
on the lives of old people. So I hope it
turns out for the best for everybody concern. That is
the conclusion of the a o L story so far,
(35:10):
America Online probably has several years left in its history.
I sure hope it does. I hope it doesn't just
go away, so I'll probably have to do an update
a follow up episode at some point in the future.
But this was a really fascinating story to look into,
very complicated from a business perspective, but interesting and and
(35:30):
connected to so many other companies, whether directly through mergers
and acquisitions or through competition. If you guys have any
suggestions for future episodes of tech Stuff, maybe it's a technology,
maybe it's another company story you would like to hear about.
Maybe there's someone I should interview. Why not let me
know send me an email. The email address for the
(35:51):
show is tech Stuff at how stuff works dot com
or head on over to tech Stuff podcast dot com.
That's our website. You got to find other ways to
contact me through there. Like on social media, you also
find information about the show. You'll see a link to
our merchandise page over at t public dot com slash
tech stuff. That's where you can buy all sorts of
(36:12):
goodies with the tech Stuff logo and various designs on it.
Every purchase you make goes to help the show and
we appreciate it, and I'll talk to you again really
soon for more on this and thousands of other topics.
Is It, how stuff Works dot com
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Oz Woloshyn
Karah Preiss
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