The former Internet darling, attempting a tough comeback, has a new strategy that goes beyond buying properties such as The Huffington Post and TechCrunch and building out its media presence with Patch, a network of struggling hyper-local news sites.
The scheme: Lease a building from Google in the heart of the Silicon Valley, let engineers go wild — just as they do at Google and Facebook — and hope it pays off with innovative new products.
"The space you work in is a reflection of the kind of company you are," says Brad Garlinghouse, AOL's president of the Applications and Commerce Group. "You get innovation," he insists, from "working in a space that's very open and doesn't have offices … where people can work together and play together."
For years, AOL has been trying to stem the erosion of its audiences by buying brands, introducing products and tweaking old ones. CEO Tim Armstrong has undertaken a number of high-profile initiatives to jump-start growth following the company's failed merger with and eventual spinoff in 2009 from Time Warner and the resulting hundreds of layoffs. But while AOL has been spending heavily to turn around its fortunes, its financial picture has yet to inch upward. In its most recent quarterly earnings report, AOL posted earnings of $4.7 million, down from $34.7 million, on revenue of $551 million, down from $664 million a year ago.
So AOL, which is based in New York, decided to open a West Coast unit and hire Garlinghouse. The former top Yahoo executive made the building one of his top priorities.
Ping-pong or pool, anyone?
AOL moved in last August and spent the year working with San Francisco-based architecture firm O+A to gut the insides and remake it into the showplace Garlinghouse envisioned.
The mood at the 225,000-square-foot, three-story building here is more like that of a technology start-up. Employees are encouraged to draw on the walls, play pool and ping-pong, and come to work whenever they like. All they have to do in return is produce hot websites and mobile apps.
Across the street from Stanford University, AOL's West Coast campus is a technology facilitator. AOL occupies only about one-third of the new space. The rest was open initially rent-free to several start-ups, including e-mail management firm Xobni and feedback researcher Medallia. (AOL has begun charging rent.)
Disney's Playdom gaming division subleases the second story. The goal is to draw creative, entrepreneurial energy from the start-ups, AOL says, by working with them on various projects. In return, young entrepreneurs benefit from being housed alongside the likes of AOL, Disney and other start-ups.
But can a cool headquarters truly pay off with increased online traffic to AOL and its many properties?
"It will get them a lot closer to their goal," says Charlene Li, founder of San Francisco-based research firm Altimeter Group. "Instead of having to fly across (the country) to see new talent, they're right here. That makes a huge difference."
Just ask Sol Lipman. After launching Rally Up, a mobile check-in site similar to Foursquare that operated out of a shared office space in Santa Cruz, he was tapped by AOL to sell his company in return for under $10 million, office space in AOL's new building, and the fancy title of senior director of mobile.
At first, "The thought of going to a big company like AOL that's in the middle of a rebirth didn't sound like my cup of tea," Lipman says. But he was invited to come in and look at the office space before making a decision. The visit sold him.
"I couldn't believe you could write on the walls," he says.
New apps in the works
At AOL, Lipman has been bringing classic AOL properties such as MapQuest, Moviefone and AIM to the iPhone and Android mobile phones. He is also working on an iPad app, called Editions, that is expected to be launched later this summer. The app is similar to Zine, Flipboard and others that turn various online media into a newspaper/magazine-like reading experience. Unlike Flipboard, which is geared toward articles that end up in Twitter feeds, AOL will be able to fill it with its own properties.
"We call it Pandora for content," Lipman says. "You tune the reader based on the content that interests you, for a deeper experience."
Lipman says AOL has 50 apps in the iTunes App Store, but analyst Greg Sterling of Sterling Market Intelligence says none is a "really hot app." Most are mobile versions of PC websites, says Sterling, who suggests that AOL "may need to buy an up-and-coming property."
On iTunes' list of its 200 most downloaded apps, only one, MapQuest for Mobile, appears. However, AOL says its AIM instant messaging app, due for a revamp later this year, is the 11th-most-downloaded iPhone app. And on Tuesday, AOL announced its AOL Music app is adding access to online radio station Slacker to its offerings. The app will re-launch later this summer for Apple devices, followed by an Android re-launch.
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