International: AOL CEO Randy Falco: Microsoft-Yahoo a Mistake

International: AOL CEO Randy Falco: Microsoft-Yahoo a Mistake

Author | Source: Advertising Age | Wednesday, Feb 27,2008 7:26 AM

International: AOL CEO Randy Falco: Microsoft-Yahoo a Mistake

PHOENIX ( -- AOL CEO Randy Falco thinks a potential merger between Microsoft and Yahoo to compete with Google is all about search -- and a mistake. But he's happy to watch the spectacle.

"I'm hoping the two of them will beat each others brains out over search and leave the display market to us," he told the 400 attendees here at the Interactive Advertising Bureau's annual conference. "I think it's a mistake. But I think Napoleon said never interrupt your enemy when they're in the middle of making a mistake."

A warning

The normally reserved Mr. Falco spewed a bit of fire and brimstone when he spoke of his competitors. "We have Platform A, the largest ad network in the world," he said, rattling off statistics such as the 3 billion ad impressions AOL's networks collectively serve a day. "Microsoft and Google can ignore us and leave us off of charts if they want, but they do that at their own peril."

He was referencing a chart used in a presentation yesterday by Microsoft's Brian McAndrews that illustrated how the digital ecosystem looks to Microsoft and where all of Microsoft's competitors fit into it. AOL didn't show up on the chart, although its division did. Mr. McAndrews also told the audience the two companies that could offer publishers the full ecosystem were Microsoft and Google, which didn't sit well with Mr. Falco.

"Technology is an enabler, but we're still in the media and marketing business," he said.

AOL is not all that interested in creating an ad exchange, Mr. Falco said, believing it's not necessary and can commoditize inventory, a concern of publishers. Mobile, however, is an area of continued investment, even though it has moved slower in the U.S. "We have to get into the game a little quicker," he said.

Mr. Falco, a self-described digital immigrant, addressed his former medium, TV: "You sit back and wonder 'Why can't these guys get out of their own way?' [Because] they have all these legacy models and partnerships and its difficult for them to get past them. But at some point they'll come to realize they have no growth. ... Generally speaking that'll bring about the change they so desperately need."

AOL's fate within Time Warner

He also responded to a question about AOL's place and future within Time Warner by saying he doesn't spend a lot of time thinking about it.

"We spent with the help of Time Warner about a billion dollars to acquire [Quigo, Tacoda, Third Screen Media and AdTech] over the past year," he said. "[Time Warner CEO] Jeff Bewkes understands if we can turn around AOL, that's going to be a major home run for the portfolio Time Warner has. The question is, can we do it? ... The extent that we can prove our case that AOL still has legs and it's making the kinds of investments and changes critical to move forward in rapidly dynamic changing marketplace, then our relationship with Time Warner will be just fine."

There continues to be hope, apparently, that Time Warner's various assets share some sort of synergy. Mr. Falco, who drew laughs when he said the AOL-Time Warner merger "didn't really go that well," said that "there's still a hangover around that and some mistrust and distrust that goes on among divisions. I'm trying very hard ... [and] I think we're making progress there. It's kind of silly that the Time Inc. assets and Time Warner Cable and AOL aren't completely together in the way they do business."


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