by Jonathan Berr | September 7, 2011 1:29 pm
AOL (NYSE:AOL) CEO Tim Armstrong’s job has become less secure in the wake of the ouster of Yahoo (NASDAQ:YHOO) CEO Carol Bartz.
Like Bartz, Armstrong, is trying to turn around a lumbering giant of a tech company that is a shadow of its former self. And both CEOs have failed to deliver for shareholders. Shares of New York-based AOL stock are down more than 34% this year while Yahoo, which is based in Sunnyvale, Calif., is down more than 17%. (Yahoo’s figures also include today’s gain in the wake of Bartz’s departure.)
According to the Wall Street Journal, “Independent directors did a study of Yahoo’s assets and performance in the past two weeks and concluded the company wasn’t performing as well as it could.” That was probably the least necessary study in the history of corporate America because Yahoo’s faults have been well documented for years. Nonetheless, AOL’s board would reach a similar conclusion if it were to conduct such a study.
AOL’s weaknesses, like Yahoo’s, are hardly a secret. It struggles to attract readers and advertisers. Yahoo lost its long-time ranking as the most popular website several years ago and last year was pushed down to third place by Facebook. Similarly, traffic to all AOL sites was flat in the latest quarter compared with a year earlier. It’s worth noting that the Huffington Post however, has seen a bump in traffic that was spurred in part by the closure of several AOL sites after the buyout of HuffPo.
So is Armstrong worse or better than Bartz? Well, neither CEO would win a popularity contest. Bartz’s ;prickly personality has been described in numerous articles though Atlantic.com noted “even if she’d been as sweet as Reese Witherspoon, people would have hated her.” Indeed, it’s tough to win friends as a cost cutter.
Armstrong is more personable than Bartz, though he has plenty of critics for allowing the company to become a magnet for negative publicity. The most recent saga involves TechCrunch founder Mike Arrington. Arrington’s boss Arianna Huffington nixed a plan that would have allowed him to write about firms bankrolled by a venture fund he would run with AOL. She told David Carr of the New York Times that Arrington had given up control of the blog — and Arrington denies this and now is demanding that AOL sell the blog back to him if it can’t guarantee “complete editorial independence.”
This is all further proof that AOL and Yahoo have failed to articulate a coherent strategy detailing how they plan to compete in today’s media environment. For instance, can these companies continue to partner with content creators and compete against them as well? Creating content is not cheap. Advertisers, though, are willing to pay higher rates for ads on stories that aren’t going to be seen on other websites. Then there’s the question of which services should be kept and which should be shuttered or sold.
These companies, which began in the early days of the Internet, need to figure out what they want to be when they grow up. Yahoo has decided to make this journey with a new CEO. AOL may make the same decision.
Jonathan Berr is a former AOL freelancer. He does not own shares of any of the companies listed. Follow him on Twitter@jdberr.
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