Tuesday, May 12, 2015

Comcast, AOL, and the Future

A month ago, the Comcast-TimeWarner merger dominated the news. People screamed, "Monopoloy!" without really knowing what that meant. They jeered "Conflict of interest!" while ignoring Comcast's prior merger with NBC Universal, and the merger between NBC and Universal that preceded it. 

After walking away from the merger, Comcast quickly refocused. Responding to customer service complaints that have become a national spectacle, Comcast responded by telling the city they know how much we hate them.

That's a smart move, albeit reactionary and not immediately profitable. 

Comcast's Innovation and Technology Center

But one question remains, why did Comcast want TimeWarner in the first place? Why would a company that claims to want to get into new technology want more cable? Were they banking on the assumption that more customers meant more money? Did they want TimeWarner's content?

As moot as the point may be now, the potentially disastrous outcome of such a massive merger may have been the reason the FCC decided to sidestep the decision and send it to a hearing. Perhaps the FCC didn't want another economic collapse heaped on its shoulders, and that's exactly what would have happened if Big Cable fell. 

Comcast and TimeWarner were beasts, both with their own bureaucratic burdens and customer service nightmares. Seamless integration would have been a Herculean feat, one that would have taken years. Even the prospect of a moderately successful integration seemed questionable.

AOL learned about TimeWarner's dated telecom mentality the hard way, and look what happened to them. Once 2000's answer to what Google is still trying to accomplish today, AOL spent $160B on TimeWarner in 2001. That's four times what Comcast was prepared to spend on the same company fourteen years later. 

While you may be temped to say it was AOL's brazen disregard for money that led to their fall, don't underestimate the power of digital media. AOL had the money, but they lost it by diving headfirst into an industry they knew nothing about. In their blind ambition to grow, they lost focus, cockily assuming they could figure it out along the way.

But today something peculiar happened. Although it may not sound as exciting as the Comcast-TimeWarner merger, it asks a lot of the questions those in the industry have been wondering for a while now. Namely: What's next?

Today, Verizon announced that it will be purchasing AOL for $4.4B. While many consumers may have written off AOL, even wondering if they still exist, never suspend your disbelief in the world of technology. Technology companies are like comic book heroes and villains. Just when you think they're dead, they're resurrected, and in a few short pages they're ruling the world. Just ask Apple. 

AOL has shrunk substantially, yes, but they've managed to survive by investing smartly under the radar. They're probably one of the most undervalued technology companies solely because of their botched merger more than a decade ago. They own quite a bit of notable content like the Huffington Post, advertising technology, and a collection of profitable companies like MapQuest. 


They have a unique history, and perhaps more like IBM than Pets.com, they learned lessons taught from the Digital Revolution, the dot.com bubble, and surviving the Great Recession. 

In the early 2000s, AOL was developing new technology that would integrate its online content with content from its newly acquired network and cable providers. But they had it backwards. Assuming that users wanted TV first, and internet second, their conceptual products like AOL-TV brought the internet into your living room, not TV to your internet. Without smartphones in everyone's pockets, they focused on desktops and the big screen. And in a 1-2-3 punch: cable internet, Apple's iPhone, and streaming content rendered the world's greatest digital media provider a struggling legacy company.

Successful companies, like people, struggle through a period of perceived indestructibility, a corporate adolescence. Much more brutal than humanity, only a few survive with lessons learned in tact. And AOL is a survivor. 

What's interesting about Verizon's acquisition of AOL isn't just the content it will acquire, but Verizon and AOL's plan for that content. While Comcast and TimeWarner continue to plug away on cable and the living room TV screen, Verizon owns access to the small screen in your pocket, and AOL is jumping at the opportunity to be a part of that. 

AOL's content already has a reputation for working well on mobile devices, despite the fact that you might not know it comes from AOL. As more and more people continue to access their devices - smart phones, tablets, even laptops - from mobile connections, Verizon's AOL acquisition stands to be more than just a savvy business move, but the first step in the next way we access digital media.

While Comcast continues to claim it will fill its new Innovation and Technology Center with the kinds of minds that built Google, Microsoft, and even AOL, we have yet to know what they intend to innovate. Replicating successful industry innovations isn't what built the Silicon Valley, delivering innovations that consumers didn't yet know they wanted did. 

For the sake of Comcast, and Philadelphia's local economy, the telecom giant needs to recognize cable's numbered days. TimeWarner wasn't the answer, and the failed merger is the region's veiled blessing. Change is coming in how we access digital content, and if Comcast intends to compete in the future, it doesn't need to be looking at what's available, what Google and Apple are doing. If they want to be innovators, they need to be looking at what's next, and inventing it.

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