AOL snags Google exec for top spot

AOL must be hoping some of that Google magic rubs off. Time Warner, AOL's parent company, announced that Google Senior VP Tim Armstrong is taking over as chairman and chief executive of the troubled Internet firm, replacing Randy Falco, who's been in the top spot for just two years. And now the big question is just what is Time Warner chief Jeffrey Bewkes signaling with Armstrong's hire--an AOL made more in Google's image, or the desire to make AOL more palatable for a spin-off?

According to ZDNet's Larry Dignan, Armstrong's hire means AOL's days of being shopped around to the likes of Yahoo are over. As he quotes Bewkes:

“Tim is the right executive to move AOL into the next phase of its evolution…We are privileged to have him preside over AOL as its audience and programming businesses continue to grow and its advertising platform expands globally. He’ll also be helpful in helping Time Warner determine the optimal structure for AOL.”

But what exactly does "optimal structure" mean? Could it be that AOL will be spun off entirely? Or does Bewkes hope to make AOL a more integral part of Time Warner as a whole? No one is quite sure, but most seem to think the spin-off angle is most likely. As the Washington Post quotes an unnamed source:

Armstrong will be responsible for the future form of AOL -- and who owns it. A spin-off of some or all of AOL's parts is likely in the future.

Still others think AOL tapped Armstrong specifically for his unique advertising/technology background in an effort to help AOL regain its former glory and become a stronger contributor to Time Warner's bottom line. Wired's Fred Vogelstein thinks Armstrong's "lost his marbles" in taking on AOL, but he does see the hoped-for synergies and how Google may have lost its luster for Armstrong. After ticking down Google's shuttering of print and radio ads, its failure to monetize YouTube and its lack of a viable answer to Facebook (which just surpassed Google as the number one referral engine on the Internet), Vogelstein sums up Armstrong's motivations, saying he:

"hasn't gotten a lot of support from the engineers in Mountain View who truly run Google. They don't understand why advertising that isn't immediately useful should even exist. I have heard executives from Eric Schmidt, Larry Page and Sergey Brin on down say this. Now, thanks to Google's ill advised proposal to help Yahoo last year, the distrust of advertisers and agencies of Google's growing market power has only grown. I wondered last year, when Google was forced to back away from the Yahoo deal because of antitrust issues, how Armstrong was going to rebuild all that lost trust on Madison Avenue he had worked so hard to create. Now we all know the answer to that question: He thinks fixing AOL is a better job.

And while that may be the case, AOL is hardly a bed of roses. If the idea truly is to position AOL as a Web-savvy advertising powerhouse to rival Google, it's far from ready. Former chief Falco just announced plans for layoffs in January that will strip AOL down by 10%, or 700 workers, and its annual revenue fell 20% in 2008, to just $4.2 billion. Armstrong will have his hands full.

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