That, of course, set the stage for the most boneheaded acquisition in history, in which Time Warner, eager for a stake in the new-media universe, took 45 percent of a merged company that valued it at $83 billion and AOL at $164 billion—at the very top of the market. Time Warner has been trying to live down the acquisition ever since, and AOL has limped along with its blue-haired subscribers, a relic of a bubble that long ago burst.
The two companies could not co-exist, that much was clear, and by 2003, Time Warner axed AOL from its name, trying to put as much distance between them as possible. The obvious path out, linking AOL to Time Warner Cable so that AOL could move subscribers to broadband primarily, was rebuffed because Time Warner was already ramping up Road Runner service and didn’t want to be had twice. AOL could see the future of the web by now with broadband, platforms, and social media—everyone could—but it was marooned. “The culture of AOL became a restructuring every 90 days, a fire drill to do a new project, and then a change of mind and a rush for the next project,” says a former employee. “Nobody had a North Star. The narrative was always ‘We’re about to be successful.’ ”
Time Warner struggled to find a buyer for the company, but suitors were hard to come by. By 2009, it hit upon the idea of hiring Armstrong as CEO, the fifth head of the company in a decade. He had started his career by establishing a small local paper in Boston, a kind of tip sheet for recent graduates, but at a presentation for Mosaic’s first browser at MIT, he became an Internet convert on the spot. In 2000, he was offered a job by Google’s co-founders as the U.S. sales chief for the company, which he accepted on the condition that he didn’t have to move from New York. For years, he ran Google’s advertising department out of his 900-square-foot apartment on 86th Street and Columbus Avenue, holding meetings at a Starbucks. He eventually built a direct-sales force of over 2,000, amassing what is thought to be a $500 million personal fortune in the process.
Armstrong has said that he didn’t have a specific vision for AOL when he was appointed, choosing to embark on a listening tour of employees in sixteen cities. Other tech companies were focused on killer apps, but AOL didn’t have any technological special sauce. The path out of the wilderness, he decided, was content, a grand journalistic experiment, in fact. Local journalism is a kind of white whale of the industry, but he believed he had the answers with Patch’s local service, a side project he had personally developed.
Armstrong began replacing management and set up an algorithm-based content system called Seed, but the company still seemed to be lurching around with no clear strategy, and hemorrhaging money. Within a year, AOL needed to fire 2,500 employees.
Then Armstrong reshuffled his editorial team, bringing in a former management guy at Google to remake AOL’s content business . Alongside a former McKinsey consultant, he implemented a vision of journalism as widgets. “They literally didn’t believe in the concept of editors, thought they were an unnecessary expense,” says a source. At one point, there was a corporate goal of producing 100,000 pieces of content a month.
Soon, the team was shown the highway, and Armstrong announced that he was buying the Huffington Post—essentially, he wanted to replace the central brain of AOL media, one that wasn’t working well, with one that was. HuffPo, started in 2005 as the left’s answer to the Drudge Report and composed largely of unpaid posts from celebrities and other name brands, had turned to news aggregation, becoming an online tabloid that was a kind of cousin of The Daily Show. It was one of the web’s biggest successes: Its metrics kept going up and up, with over 100,000 comments a day, bringing the total to over 100 million comments since founding.
“For our macro, go-forward AOL corporate strategy and the future of where we think the Internet’s going, the Huffington Post was a plug-in that fit multiple strategy points for us,” says Armstrong, speaking in the patois of his industry. He mentions the brand’s power with commerce, women, and influencers. “Brands are the invisible hand of the urbanization of the web,” he says. “It goes back to Adam Smith, in The Wealth of Nations—these brands are helping people live better and more enjoyable lives.”
Huffington was interested in selling her company, even if her board was not. “Our plan until we heard from Tim was to continue growing HuffPo and do an IPO,” she says. “But I felt this was an incredible opportunity to accelerate the plan.”