Tim Armstrong Must Be Mad as Hell; Will He Take It Anymore?

You win some, you lose some. The question is how many Tim Armstrong is willing to lose before saying sayonara to AOL.

Yahoo today will announce that it has acquired VC-backed “open content” platform Associated Content for what reports are pegging at around $100 million. It had raised $21 million from Armstrong, Softbank Capital and Canaan Partners.

Associated Content, which pays an enormous army freelancers to generate search-engine optimized content on the cheap, has held talks with various acquirers for years — including with Armstrong on behalf of AOL. But, according to Silicon Alley Insider, in which Armstrong is also an investor, he was shut down by Time Warner when talk of buying Associated Content picked up late last year.

The problem, according to SAI’s source, was money; Time Warner didn’t have the $100-plus million that Associated Content wanted — or at least, it wasn’t prepared to give that much to its still-new CEO. (Armstrong, formerly a Google senior VP, joined the company in March 2009.)

Armstrong did manage to acquire another of his seed-stage investments, the local blog network Patch, for AOL last July. He didn’t profit off Patch’s sale to AOL, instead getting his seed investment repaid in AOL stock. Most certainly, the transaction would have been handled similarly had AOL acquired Associated. More, the company would have fit in nicely with Armstrong’s ongoing efforts to grow the number of cheaply run content properties off which it can leverage ad dollars. As it happens, it fits nicely into Yahoo’s vision to do exactly the same.

At least Armstrong makes a few bucks this time around. And the deal shines a light on an interesting portfolio of personal investments for Armstrong, one that both Armstrong’s younger brother Donald and John Brod, formerly Patch’s CEO and now the head of AOL’s venture arm, helped to assemble.

Armstrong’s remaining investments include: Betaworks, the New York-based holding company, Silicon Alley Venture Partners, a wealth management tools startup called Summitas, the National Lacross League team Boston Blazers, and the United Football League, launched last October. (Its teams intend to play in markets where the NFL doesn’t have a presence.)

How well the loss sits with Armstrong over time remains to be seen. When he joined AOL last year, Wired writer Fred Vogelstein asked: “Has Tim Armstrong lost his mind?”

Restating the conventional wisdom about AOL — which worsens if Yahoo handles this acquisition well –  Vogelstein wrote:

AOL has become a place where good ideas go to die. You don’t innovate as an AOL executive anymore, you make grandiose claims about a vision and wait for the next restructuring that frees you from any accountability.

Fixing this poisonous culture will no doubt be Armstrong’s first order of business, and if AOL was a stand alone company I’d think he had a good shot at making it happen. The trouble is that AOL isn’t a stand alone company. It is part of Time Warner — the folks who own CNN, HBO, Warner Brothers along with Time, Fortune, People, and Sports Illustrated.

Time Warner’s content is good, sometimes inspired. But it is one of the least technologically savvy organizations on the planet — and one that has powerful executives who are still proud of that fact. 

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1 Comment

  • Armstrong founded AC with Beatty. Bartz just endorsed (to the tune of 100 mil) a vision for the Internet he had 5 years ago – and Armstrong as a visionary in the Internet space.
    Bravo.

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