Tag Archives: Tech Crunch

Here is how AOL makes money

It’s bad news for content providers because AOL makes no money from them at all.  Instead they make all of their money from old AOL dial-up subscribers who haven’t looked at their credit card statement in a very long time.

AOL beat Wall Street’s Q2 revenue and profit numbers. And, like the last few quarters, the company says that its content business — sites like Huffington Post and TechCrunch — was profitable, if you’re willing to accept a fuzzy definition of profit.

But as always, the most amazing thing about AOL’s business is the thing that drives AOL’s business: Millions of people, who started paying the company a monthly fee for Internet access more than a decade ago, who continue to pay the company a monthly fee for Internet access, even though they likely aren’t getting Internet access from AOL anymore.

AOL doesn’t break out precise earnings numbers for this business, but it gives you enough hints to understand that it’s enormously profitable. As it should be!

Tim Armstrong’s company says its subscription business generated $143 million in “Adjusted OIBDA” – its proxy for operating income — last quarter. That’s more than the $121 million in Adjusted OIBDA that the entire company generated.

Here’s how it makes that money: Getting a shrinking number of subscribers — 2.34 million this quarter, down from 3.62 million at the beginning of 2011 — to pay an increasing amount — the average AOL subscriber now pays $20.86 per month, up from around $18 a few years ago. 

What passes for tech journalism

So this is the scene in the Silicon Valley

It’s tough being a journalist, especially if you’re covering technology and living in Silicon Valley, because it seems as if everyone around you is getting fabulously rich while you’re stuck in a job that will never, ever make you wealthy. What’s worse is that all these people who are getting rich don’t seem to be any brighter than you are and in fact many of them don’t seem very bright at all. So of course you get jealous. And then you start thinking maybe you could find a way to cash in on this gold rush. But how do you make gobs of money when your only marketable skill involves writing blog posts?

This is the conundrum, but lately I’ve been thinking of a business plan that sounds like it could work. First you establish yourself as an “influencer” by posting a lot of noisy stuff on a blog and building an audience. Then you need to “monetize” your influence. You tell all the VCs in the Valley that you are starting an “angel fund,” and you ask each one to give you, say, $500,000. They go along because (a) $500,000 is pocket change to these guys — so small, in fact, that they don’t care if they lose every penny of it; and (b) you’re an influential hack and they don’t want to piss you off; and (c) they figure you can maybe write nice things about their portfolio companies, which would be especially useful if/when one of their portfolio companies gets caught up in some scandal; and (d) if any independent journalists write something critical about one of the VC’s portfolio companies, you can can use your influential personal blog to savagely attack those journalists and try to discredit them.

So you raise $10 million or $20 million, and now you’re an “angel investor.” Step two is you go around to startups and tell them you’d really like to invest in their companies. Not big investments — maybe $100,000. They don’t need your money; they can raise money from anyone, and usually you’re one of 10 or 20 small investors in a round. But the value you add is that you’re an “influencer” and can be helpful when it comes to getting good press or offsetting bad press. (See paragraph above.)

You might think of this as a new kind of PR, only you’re way meaner and more effective than a PR flack, and instead of getting paid in billable hours, you’re taking payment in angel-round equity, which in a few years should be worth 10-100x whatever those billable hours would have been worth.

In fact this is a new version of an old racket that used to be practiced in the tech space by guys who called themselves “independent analysts.” Their deal, back in the day, was this: “Pay seven figures a year to buy a corporate subscription to my newsletter and I’ll say nice things about your company, and when the press needs a quote, I’ll be there to puff you up. Or, don’t buy a subscription and I will bash you relentlessly.” Most big companies paid up and considered it a cost of doing business.

Well, this is the model I was thinking about, but it turns out someone beat me to it — it’s called CrunchFund, and in the past few days we’ve seen the machine in action, and it is indeed a beautiful thing.

Why I hate the cloud.

I have had a Gmail account since Gmail opened it’s second round of invites years ago.  Users had five invites and because I was only two degrees separated from someone at Blogger, I got one.  It was like gold and it was amazing.  Within days I stopped using Outlook and started to rely on Gmail for all of my email.  The launch of Google Calendar meant that I could move my life to the cloud and it worked perfectly for me for years.  When I was at the Salvation Army Community Services, we used Google Apps to power email which meant that I never did need Outlook or anything there either.  With Google Calendar integration I could have my life at a glimpse.  While I was always frustrated that Google Contacts didn’t sync up Google apps and my personal address book, it worked well enough that I didn’t complain.

About six months ago a friend emailed from a major U.S. company.  I had sent him an unimportant email about a year earlier and he never got it until that day.  He blamed his company email system and I never thought about it.  During this time I would send my column to two different email addresses at The StarPhoenix and every once in a while I would get an email close to my deadline and it would be the editor asking for my column.  It kind of freaked me out but again I would think it was The StarPhoenix’s email system and I would send it again and it would be good.  I was using Google’s email system after all.  Now my editor just emails me back as soon as he gets it.  I still get nervous when I don’t get an immediate reply but he is human and could actually be doing other things but even two weeks ago I was surprised how long it took him to reply and I wondered if the column got there or if he was busy.   It isn’t just him, during that time I would email someone once in a while at The StarPhoenix and wouldn’t get a reply.  Some email gets replied to, some doesn’t and I figured it didn’t get replied to.

Then my email got hacked and it was a horrifying experience.  During that time I lost some email but blamed it on that.  I have a new password (my old one was only six letters and one digit long) and then brought in double authentication but I was still wondering why I didn’t get replies at times.  The last couple of weeks since I have had my new phone, it has been happening more and more and I was blaming the phone.  Like many of you, I have 3G connection issues in parts of Saskatoon and was wondering if that was the problem.  Over the last couple of days, everyone has been pissed off at me for missing emails and I realized I was also getting them out of sync.  I also fired off some important email and people are telling me they never got them.  That scared me because both were really tech competent people on reliable mail servers and the email was sent by my laptop via the Gmail interface.  No email client, no phone, just me and the computer sending to two different reliable email services. I contacted Google and haven’t heard a thing back.  I was searching my email tonight looking for emails that I knew I had not deleted and there was a massive hole from 2008 in it.  I know was recently hacked but those emails were restored.  No sign of it at all today.

I remember the rants that Tech Crunch used to have when Google Voice was offline and I now understand what they were so angry about.  Google isn’t just providing a service, they are providing a service I rely on dearly.  When the internet went down on my block, I can work around that, my primary email acct not working is horrific.  My friend Nathan had a horrible experience with Twitter.  It was mindboggling how stupid it was over a glitch that was completely their fault.  They finally just stopped talking to him about their problem and he was locked out of his account.  All of this contacts and followers were gone and there isn’t much you can do about it.

What’s even more bizarre is that when you read the Google help forums, I am not alone.  Some are user error but most are just disappearing emails.  The thing is that the reason I went to Gmail in the first place was because of Google’s reliability.   What I found out is that it is company that really offers no customer service at all.  They talk all of the time about the small % of users affected.  That’s great that it is .61% until you are one of the quarter of a million users that are affected and then it is no fun at all. 

The other hard part is that who do you contact at Google?  You can’t call them or write a support ticket.  You can leave a note in the forum.  Back in the days when Blogger was small and buggy, you knew you could email Ev or Biz and get a response.  Even today with Dreamhost, I can get a support ticket answered within minutes but I can’t with Google. 

I use Koodo as my cell phone provider.  It is horrible to use to send texts.  I just was sending texts back and forth with Seabass (if you know who I am talking about, you will get it) and I had about 10 “fail to send” texts but I know that my texts are not getting through and I know that he isn’t getting them.  Yet when I text’d a guy I’ll just refer to as Man-Bag yesterday, he said he never got it which is an entire other frustration.  Is it Koodo or Sasktel or the fact he may not understand his new iPhone.  It’s frustrating and now I am mad at Google, SaskTel, Man-Bag, and Koodo.  I’ll quit while I am behind.

I’d tell you to email me with your suggestions but I won’t get it.