It was less than a decade ago when Time Warner bought AOL.  Time Warner was going gangbusters.  It had grown out of the old magazine business to be a leader in television cable programming – even buying the business run by the #1 cable entrepreneur Ted Turner.  Simultaneously, AOL had become the #1 company providing internet access.  At the time, people didn't just buy access to the highway (the web) in form of a communication line, in the world of dial-up and early broadband they bought into a web provider.  AOL offered everything from the dial-in number to the home page and a series of tools to make web access easier for neophyte users.  In all the hoopla about how Time Warner had content, and AOL had "eyeballs" (meaning people going on-line at computer screens), the merger of AOL and Time Warner was born.  A very, very high priced Time Warner used stock to by a remarkably high priced AOL. 

But this marriage soon became a nightmare, with fingers pointing at everyone – from the CEOs to the Boards of Directors and many people in management.  AOL and Time Warner could not maintain the growth rate.  Worse, people showed the first signs of moving from TV viewership to internet use, and AOL was losing share of market quickly as broadband became available.  Infighting and bickering took over.  Both companies, virtually all of management, was trying to build an industrial company out of what they had.  Management kept talking about how it wanted to "control" customer access, "control" internet behavior, while focus remained on "scale" as they wanted to become the "largest" internet provider and the "largest" content provider.  The leadership had built both companies, and raised money, using an industrial model that expected the companies to somehow use size and scale and market share to reduce industry rivalry, control vendor costs, and allow for much higher pricing to justify the equity multiple. 

Oops.  By 2000 we already were well into the information economy.  Scale had almost no meaning – even for telecom companies that crashed as people realized even big infrastructure suppliers couldn't avoid intense competition and low prices.  And as the web expanded access 100 fold, early expectations that there would be insufficient content thus making the Time Warner content priceless (news, broadcast programs, cable programs, etc.) quickly gave way to the knowledge that content could expand 1,000 fold (or 10,000 fold) when everyone had access to viewers/readers.  The industrial model upon which AOL/Time Warner had been built simply would not work.  And as the stock went into freefall, executives started rotating around the top offices.

Now, a new CEO has been hired.  He's from Google according to Marketwatch.com in its article "With new chief in place, will AOL stand on its own?"  And as the headline implies, many industry analysts are banking on a spin-out of AOL.  But you have to ask, "why bother to spin out AOL now?"  The notion of combining the capabilities of both has a lot of appeal – if you understand how to build an information based Success Formula.

AOL is one of the 4 top companies at reaching people on the web.  AOL gets about 60% of the monthly users as Google.  That's a pretty high number.  The obvious issues should be: Are the current web sites the right ones to appeal to customers?  Do they have competitive differentiation?  Looking forward, what web sites would excite viewers and attract them?  What sites would change competition?  At this stage, it's really hard to imagine that we're anywhere close to identifying the maximum value web sites.  With good scenario planning and competitior analysis, AOL has the resources, access and content to reposition itself as a leader for users.  As Yahoo! fortunes keep declining, AOL can build content-based reasons to grow.  Additionally, AOL can identify opportunities which are not already fortresses for Google, and work to build out those opportunities before Google gets there.  It's an unlimited world, and AOL/Time Warner has the right resources to be a major competitor for customers and revenues.

We need to watch closely what the new CEO (Tim Armstrong) does in his first few weeks.  The analysts would like for him to talk about a spin-off.  That reinforces their outdated views of industrial business models and would make them feel better about themselves and their long-term calls for changing the company.  But the smarter action would be for Mr. Armstrong to Disrupt the Lock-ins at AOL/Time Warner that have kept the company doing many of the wrong things for 8 years.  The leaders at AOL/Time Warner have been ineffective, and the existing decision-making processes are inhibiting value creation.  He must break the behavioral and structural Lock-ins that have allowed AOL/Time Warner to be a perennially bad performer.

Next he should use his experience at Google to make AOL/Time Warner start acting like Google.  He needs to take advantage of his customer reach to find out what those customers want, and then open White Space projects to deliver it to them.  He needs to quit focusing on the "internal assets" and refocus on the marketplace.  AOL isn't going to win or lose by acting like AOL.  He needs to move AOL into position to recognize the next YouTube or Twitter and get out there!  Just like News Corp. was able to buy MySpace, AOL has the resources to make a difference in the market.  A spin-off would leave 2 companies with outdated Success Formulas that could easily become obsolete.  But by implementing White Space focused on the market AOL could create an entirely new Success Formula based on information content and information value that would have a high rate of return for the beleagured investors.

AOL CAN have a great future.  It is one of the leading companies at reaching people on the web and via TV.  What AOL needs to do now is figure out how you make money off the value of all the information that customer contact gives you.  Google has captured every single search ever done on its engine, and never stops milking those searches to figure out how to grow and make money.  AOL needs to do the same thing - figuring out how to build the right information-based model that makes serving its customers profitable.