Miller's AOL Innovation Speeded His Demise
Saturday, November 18, 2006
Outgoing AOL chief executive Jonathan F. Miller, fired on Wednesday, may have been a victim of his own last-minute success.
Miller will be replaced by NBC Universal's Randy Falco, known as a top-rate broadcaster but, more important, as a dot-the-i's operations manager. It would have been difficult if not impossible for AOL to attract an executive of Falco's rank and reputation had Miller not helped guide the company to the turnaround it demonstrated in its most recent earnings report, a source close to the situation said.
Over the summer, Miller, who joined AOL at its low point in 2002, just after the federal government began criminal investigations into its operations, persuaded parent company Time Warner Inc. to ditch AOL's longtime business model and adopt a new one: give away its content.
The Dulles company, which had been the leading provider of dial-up Internet access, would allow its subscribers to leak away and hope to make up the lost revenue by selling high-speed Internet advertising.
Miller had tried other strategies for resuscitation that failed, such as converting dial-up subscribers to AOL high-speed access. He strived with varying degrees of success to cultivate high-profile content at the site, including a heavily promoted Foo Fighters concert in Washington put on by the company for its subscribers. For more than three years on his watch, the company's future was in doubt, with talk of spinoffs and other reorganization.
This time, however, Miller's idea hit something.
When Time Warner's third-quarter numbers came out on Nov. 1, the AOL unit showed a 46 percent increase in advertising sales, almost offsetting lost revenue from subscriber drop-off.
A little over two weeks later, once his company had shown demonstrable value and a potential for growth, Miller was fired. Other than a statement on Wednesday, Miller has not spoken about his ouster.
In business, there are strategy guys and operations guys. At Time Warner, Miller -- who ran the Internet side of Barry Diller's USA Networks and worked for the National Basketball Association in previous careers -- was seen as a strategy guy. In the old days of AOL, when it was still America Online, everyone, it seemed, was working on a new project, a new deal. "Let a thousand flowers bloom" was the motto. On the downside, that led to fiefdoms, a lack of control -- as seen by the improper accounting that led to mammoth SEC fines and Time Warner write-downs -- and a bit of a Wild West mentality.
Miller helped expunge the bad elements of that era, said the source, who spoke on the condition of anonymity because the executive shake-up is a personnel matter. Miller was able to put the company firmly on a new course, one that looks like it might work. In one of the business world's ironies, strategy guys are often not seen as the best guys to run a company once it's on the right track.
Falco, the source said, is an operations guy. And Time Warner is no longer contemplating an AOL spinoff.
Miller and longtime AOL executive Ted Leonsis visited editors and reporters at The Washington Post on Nov. 3. The Falco hiring took place so quickly, the source said, that Miller probably did not know that his dismissal was looming even as he ate lunch at the meeting.
Meanwhile, a fan of Miller's at AOL quit on Thursday in the wake of his firing.
Jason Calacanis, who founded Weblogs Inc. in 2004 and sold it to AOL in 2005, called Miller a personal mentor and a "quiet samurai who saved the village" in a posting on his blog. "Miller is not a brash self-promoting CEO, and maybe that worked against him a little," Calacanis wrote. Calacanis was reached by e-mail yesterday but did not answer questions in time for this report.
Leonsis also chimed in yesterday on his blog, "Ted's Take," praising Miller and painting in stark terms the AOL he walked into.
"The outlook was grim, and the mood among employees was even grimmer," Leonsis wrote. "People were embarrassed to say they worked for AOL, and even more embarrassed to say they used it. We were a symbol of dot-com hubris and a case study in failure for business school classes."
Leonsis said Miller led AOL to standardize its advertising systems to comply with industry norms, helping AOL compete for ad dollars against Yahoo and Google; bought companies such as Weblogs that fit AOL's vision, and knocked down much of AOL's vaunted "walled garden," giving nonmembers access to AOL content.
The crucial move, however, was persuading Time Warner to let AOL flip its business model, a move endorsed by Time Warner President Jeffrey L. Bewkes.
"So Jon took a step that will serve as a new case study for future business school classes, a case study in courageous and visionary leadership," Leonsis said.