HUGE AOL SHAREHOLDER: Here's Everything Tim Armstrong Is Doing Wrong [SLIDE DECK]

tim armstrong

Photo: Flickr/MattHurst

One of AOL’s largest shareholders, Starboard Value LP has a massive presentation on everything Tim Armstrong and co. are doing wrong.If the name Starboard sounds familiar, it’s because it led the charge to get AOL to sell its patent portfolio for $1 billion. That was pretty smart!

Maybe Tim Armstrong wants to listen to more advice from this group?

We have Starboard’s presentation embedded here.

It’s an entertaining read from start to finish, but if you just want the key takeaways, here they are:

  • AOL needs to kill Patch. It just doesn’t work as a business, and advertisers hate it.
  • AOL needs to make its display business profitable by cutting the fat, and investing properly.
  • AOL has made the once profitable Huffington Post unprofitable. This is a metaphor for the company at large.
  • AOL needs to analyse each business division on its own and make them profitable.

If you read the whole presentation it’s a pretty clear headed argument that AOL could be running a much better business. (This presentation from Starboard is based on third party analysis by L.E.K. consulting.)

Here we go ...

Meet our hosts on this presentation, Starboard. It currently owns 5.3% of AOL.

Quick refresher: AOL has five business segments

The display business is down in the dumps, says Starboard


AOL has a lot of pageviews, a lot of unique visitors

But it's not doing a good job running these sites, thus organic display revenue is down 13% since 2009

It's not impossible to make money on display ads. See:WebMD

See Also: CNET, which is profitable.

What is AOL doing wrong? Too many brands, too many sales people.

Look at HuffPo. Before AOL bought it, it was a profitable, scrappy startup. Now it's fat and unprofitable.

AOL's investments are killing the bottom line.

AOL needs discipline to run its display business.

Uh oh, this could get rough ...

Patch is AOL's collection of hyper local sites...

And it's leading to significant losses for AOL

Patch is a loser, time to kill it, says Starboard.

Seriously, just give up. It will never scale.

AOL has always been deluded about how expensive Patch really is.

Patch sales people say it can't fill its ad slots.

70% of Patch advertisers don't renew their ad rates.

Why? Because you don't need Patch and its high ad rates, just use Google AdWords.

AOL fills Patch with remnant ads.

100% of national advertisers say Patch is worthless.

No! It is not.

So, kill Patch, and don't let Tim Armstrong's personal attachment to Patch affect the board.

AOL claims search and display are related, but that's just not true.

Patch does nothing for search.

Owning content does nothing to help AOL's search business

It's OK to own some content sites, but it's also OK to outsource some content.

What drives search for AOL? Its home page, and people who use AOL's software.

Therefore, any decisions about investing in display need to be seen outside of the search business. It needs to be viewed independently.

If AOL doesn't fix display, the company is in jeopardy

Starboard can't emphasise this enough, KILL PATCH.

AOL needs to look at each business line on its own and decide if it's strong enough to stand on its own two feet.

Elect our board members! They will kick butt, and keep Armstrong in line.

Who are Starboard's board nominees? Glad you asked ...


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