Commentary

The World A Better Place Without AOL?

In a media world that tends to over-consolidate into mega-companies that hinder choice and innovation, the ongoing financial scandals may yet prove a useful correcting force. In news that can hardly be called surprising, the Washington Post reports that AOL may be under further investigation for sleazy accounting. AOL, the poster child of seemingly magical online ad revenue a few years ago, could face enormous additional liabilities, even over and above its current $25 billion of debt and lawsuits from shareholders who collectively lost more than $200 billion in capital.

Much hand wringing has ensued, with many executives afraid that putting the beleaguered company under further liability can only bury it, further injuring the industry. But I, for one, think this might be a lucky break for us.

Unemployed media people may remember that AOL was the primary player in the over-exuberant expectations setting of unsupportable online revenue projections. AOL admitted to $190 million of fictional revenues, but it's been a moving target. Press reports this week indicate that the United States is considering "going criminal" on AOL, seeking indictments for more than just the run-of-the-mill accounting gimmicks.

advertisement

advertisement

Many former online media people, some now banished to the "square" media in the downturn, find it frustrating that, even as real online billings continued to slowly increase, the revenue recognition for them took a nose dive when AOL and other companies posted corrections for previous incorrect accounting. In other words, even as our industry recovers from slowed growth, the public perception remains that we're in a depression. Failing to see the subtlety that the real billings continued to increase, or perhaps now no longer trusting online numbers at all, financial market players fled the online field, making raising capital in a capital-intensive industry nigh impossible. Even marketers have been more reluctant to continue to put more of their ad dollars online, armed with the excuse that online media itself has been somehow implicated in a sham. Having some of the cancerous growths of our industry cut out may well help save the healthier parts.

It doesn't help that our own IAB uses financial disclosures as its method for determining how much money gets spent in our industry. While suspect before, now the methodology appears untenable, as improper disclosure from companies like AOL make for false trends of high spending a couple years ago and very low spending now. We can hope that this method will change soon, or at least past figures will be corrected as the financial figures are changed.

Which leaves us now with what might prove to be a true correcting force in the industry. What happens if a company like AOL gets broken up in bankruptcy? Call me optimistic, but I think some interesting and positive things happen. Rather than hide-bound, debt-ridden conforming media companies that tend to focus on large scale, non-innovative media deals, the many properties of AOL would get distributed to all sorts of companies. Some would get bought out by their management and operate as freewheeling entities.

This may sound disloyal, but I've stopped crossing my fingers for the big AOLs of the world to survive. I think it's much more captivating to anticipate a world in which properties like Time, the AOL online service and HBO are forced to rely on their own creative powers - rather than greater economies of scale - to compete in the marketplace.

Next story loading loading..