As images of industry consolidation and organizational synergies go,nothing was more iconic than the photograph that appeared, early in2000, of AOL chairman Steve Case bear-hugging Time Warner head JerryLevin. Most mergers and acquisitions were sealed with a heartyhandshake. This one came together with an effusiveness that suggestedthere was something particularly victorious and innovative about thecombination. Which may have been the first mistake the industry made.
News on Thursday that Time Warner would, after much speculation,spin off AOL as its own, publicly-traded entity again could easily beread as the final admission of failure of the original dot-com dream.At the time, the merger was seen as the ultimate convergence of contentwith distribution. Time Warner had People Magazine, Fortune and, em,Time, not to mention movies and TV programs. AOL had millions of eagerWeb users surfing for something interesting. It was hard to imagine howit couldn’t work.
With 20/20 hindsight and a growing library devoted to managementmissteps at both firms, industry watchers probably feel pretty smugabout how things turned out. In some respects, though, I think we’relucky it didn’t work, and the deal’s failure does a lot to explain thesuccess of other entities.
The AOL-Time Warner deal reflected an oversimplified understandingof how the Internet works. In those days, we saw a lot of brochurewareportals, with little more than a marketing message attached to a URL.It was thought if you built it people would come, and the resultingfrenzy led to a lot of technology staff shifting from stable corporateenterprises to startups that soon went down in flames. Similarly, TimeWarner thought like an incumbent, assuming that merging with one of thelargest contender in an emerging market would ensure it didn’t fallbehind.
Imagine if buying a major ISP was all it took for a content providerto excel in the digital age. There are only so many such players to goaround, and we quickly would have seen an unhealthy amount ofconsolidation that severely limited consumer’s choice. Instead, manyorganizations grew their own Internet identity rather than glom on toan already-established online presence. This involved not only a lot ofWeb design work but creative approaches to content management,e-commerce and making use of public networks and search engines. Inmost cases, this was the kind of contribution IT departments made, andwhat many continue to make. Or put it this way: inside every TimeWarner is a little AOL.