January 07, 2004

Eating Your Own Dogfood!

In a passage that seems ripped from a cyberpunk novel, a daring reporter hacks into the key communications system of a group of high corporate executives, monitors their daily activities, and then ambushes them by posting probing questions about their forthcoming unannounced merger directly to their computer screens.

Of course, the "key communications system" was nothing but AOL. The "high corporate executives" were the executives of AOL itself. The "daring reporter" is Wall Street Journal reporter Kara Swisher. She "monitored their daily activities" by adding them to her own AOL Buddy List. And the direct access to their screens was provided by AOL Instant Messenger. AOL executives back then really did eat their own dogfood. And reporters covering them ate it too.


From Kara Swisher and Lisa Dickey (2003), There Must Be a Pony in Here Somewhere: The AOL Time Warner Merger Debacle and the Quest for the Digital Future (New York: Crown Business: 1400049636).

pp. 1-7: ...the door slammed in my face from 3000 miles away.... Luckily for me, it wasn't a heavy wooden door, but a virtual one. Many virtual ones being banged shut by different high-level executives at America Online Inc. almost immediately after I pinged them electronically. I had done so because an unusual number of them were logged on... in the wee hours of Monday, January 10, 2000. How did I know this? The digital footprints were unmistakable, right there on my "Buddy List"....

I wasn't AOL exec-fishing just for fun.... Peter Gumbel... had just gotten a killer tip... Time Warner was merging with AOL.... More important, Peter's source had told him that AOL and not Time Warner was going to hold the majority stake.... Even in the midst of what turned out to be the Internet's frothiest moment, this was still a jaw-dropping idea.... As I would later write, a company without assets was buying a company without a clue....

Peter Gumbel had called reporters in various cities to get a critical second and third confirmation.... I dialed into the AOL service to see if I could email someone.... It soon became clear that pretty much everyone in any position of power at AOL was signed on to the service.

"We know," I wrote in a flurry of initial instant messages, attempting to be as vague as possible. "Tell all." I hoped this would produced a response....

Slam. Slam. Slam. Slam.

The people I had I[nternet ]M[essag]ed were signing off the service as soon as the little message bombs I sent had exploded onto their screens.... [M]any... block[ed] my messages.... The technique was usually used... to deflect creepy online chatters, which I now seemed to have become to the top rank of AOL executives...

Of course, almost all of the traditional atmospheric tropes of the cyberpunk novel--the drugs, the cybernetic nanosurgery, the tattoos, the concrete floor, the weird sex with avatars or puppets of post-human entities, the loft in a burnt-out neighborhood of a post-apocalyptic city, the ever-present brain-frying dangers of Intrusion Countermeasures Electronics--were missing when Bob Pitchman, Steve Case, Ted Leonsis, Dave Colburn, Myer Berlow, and company stared at their computer screens at 2 AM on January 10, 2000, and realized that Wall Street Journal reporter Kara Swisher (1) knew that they were all online, (2) knew that they were doing something about a merger, (3) had at least a hint that the merger was with Time Warner, and (4) wanted them to talk. And it is somewhat of a letdown that the software tools used have names like "AOL Instant Messenger" and "Buddy List," rather than names like "Satan" or "KRAXXER" or "Black Ice VII" and origins in the machine-language bit-by-bit hand-craftwork of insane programming geniuses living underground under false identities with large corporate prices on their heads.

But you can't have everything. And it must have been a highly cool moment indeed to have been there at: her, thinking "I see them, I see them all, and this panicked collective reaction means that Peter Gumbel's tip is true"; them, thinking, "she sees us, how long has she been watching us, what does she know?"


How was the book, you ask? Not as good as Swisher's previous aol.com book about AOL, which was very good indeed. The book doesn't have enough numbers. This book doesn't have enough on post-merger operations. I started the book knowing that the collapse of the internet bubble and of AOL's valuation with it meant that the merger would have been judged a total failure no matter what, but not knowing why it is that AOL Time Warner is not a happy company. I had three theories: (1) AOL Time Warner could never have been a happy company because the synergies between the online business and the old media business didn't exist, and so there never was any prospect of cooperation between the AOL side and the Time Warner side generating big profits. (2) The upper-middle managers on the Time Warner side sabotaged the merger, and prevented the realization of synergies that really were there. (3) Gerard Levin chose the wrong executives to run the combined business and they couldn't figure out where the real synergies were.

I ended the book with the same three theories, and with no better idea of how much weight to allocate to each of them. Recommended for gossip (which is very good). Not recommended if you want to know why, say, AOL Time Warner couldn't figure out a way to make huge $$$$$$$ by selling the songs of Time Warner recording artists over the internet to AOL subscribers.


Kara Swisher and Lisa Dickey (2003), There Must Be a Pony in Here Somewhere: The AOL Time Warner Merger Debacle and the Quest for the Digital Future (New York: Crown Business: 1400049636).

pp. 1-7: When the door slammed in my face from 3000 miles away, I knew Steve Case had actually managed to pull [it] off.... Luckily fo rme, it wasn't a heavy wooden door, but a virtual one. Many virtual ones being banged shut by different high-level executives at America Online Inc. almost immediately after I pinged them electronically. I had done so because an unusual number of them were logged on... in the wee hours of Monday, January 10, 2000. How did I know this? The digital footprints were unmistakable, right there on my "Buddy List"....

I wasn't AOL exec-fishing just for fun.... Peter Gumbel... had just gotten a killer tip... Time WArner was merging with AOL.... More important, Peter's source had told him that AOL and not Time Warner was going to hold the majority stake.... Even in the midst of what turned out to be the Internet's frothiest moment, this was still a jaw-dropping idea.... As I would later write, a company without assets was buying a company without a clue....

Peter Gumbel had called reporters in various cities to get a critical second and third confirmation.... I dialed into the AOL service to see if I could email someone.... It soon became clear that pretty much everyone in any position of power at AOL was signed on to the service.

"We know," I wrote in a flurry of initial instant messages, attempting to be as vague as possible. "Tell all." I hoped this would produced a response....

Slam. Slam. Slam. Slam.

The people I had IM'ed were signing off the service as soon as the little message bombs I sent had exploded onto their screens.... [M]any... block[ed] my messages.... The technique was usually used... to deflect creepy online chatters, which I now seemed to have become to the top rank of AOL executives...

pp. 124-5: In a December 23, 19998 email... Case advised [his major executives] to think big, even as he appeared nervous about AOL's growing valuation. AOL now needed, he insisted, something much more stable. "I like the idea of buying fallen stars that have real assets versus chasing the highfliers that are fluffy and inevitably will come crashing back to earth," Case wrote, noting he was amazed that the online auctioneer eBay was worth $12 billion at that point. "Given the Internet zaniness, I also like the idea of looking beyond... companies that have a profound impact on how people get informaiton, communicate... buy... are entertained.... They tend to be suffering from the Internet momentum."

p. 145: Fannie Mae head Franklin Raines raised a legitimate concern about the 71 percent premium [for Time Warner shares], noting that at some point it might look as if AOL was selling the company at a discount...

p. 241: Columnist Allan Sloan first made this salient point.... "[Case] actually took wonderful care of his old America Online shareholders by snookering Time Warner into taking bubble-inflated AOL stock.... AOL stock is probably sellin gfor about twice what it would be fetching without the deal." Internet stocks, as Sloan noted, were mostly down 95 percent, and if AOL hadn't merged it might have gotten as low as $6 a share, rather than languishing in the mid-teens as AOL Time Warner stock.... "Steve was fabulous for his shareholders," John Malone, the cable baron, admitted to me.... "They should build a statue to this guy."

Posted by DeLong at January 7, 2004 04:16 PM | TrackBack

Comments

Well, it sure seems to me that #1 is/was true. The content was there, the delivery system was there; it shoulda worked. Dunno if it was 2 or 3.

Posted by: Linkmeister on January 7, 2004 04:35 PM

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"All is discovered! Fly at once!"

Part of my New Year's self-examination is to make sure that I would still, if I got that famous message, just turn it over to see who it had really been addressed to.

Posted by: clew on January 7, 2004 06:47 PM

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If it is really the case that someone could join the discussion by just adding AOL execs to her buddy list and if they were clueless about it, it is sad. I find it hard to beleive, though.

Posted by: Leopold on January 7, 2004 10:17 PM

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Well, upon re-reading the original message, it seems she did not join the discussion - she saw people online, assumed they were talking about the merger and IM'd them. Being execs they run for the hills rather than to take the responsibility telling her they were discussing a poker game. The only real content is that you can derive some info from the fact that a certain group of people are on IM. The rest is a usual bombast. No story here.

Posted by: Leopold on January 7, 2004 10:28 PM

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Well, look, I don't know any details about AOL Time Warner, especially in that which side's management was to become dominant after merger, because that's important.

I mean if AOL side was to become dominant after merger, it would be catastrophy. Nothing but catastrohopy.

For a moment, forget internet and still try to imagine an "equivalent merger". Suppose there is again Time Warner and this other big company PND, in printing press and newspaper distribution business, and PND management is becoming dominant after merger. Ssheshhhh! ( I learned that from this blog recently!)

At one point I saw on TV number one guy of AOL and he just didn't look to me like a communications guy. He was standing next to Time Warner chief I guess and they looked worlds apart. Time Warner guy looked like he has seen every proof copy ever published and has been to stage of every movie made and heard about authors' and actors' complaints about their cats being neutered and bath rooms being renovated with plumbers giving them hell. The AOL guy, tough, just looked blank, plastic.

And, soon after they took over CNN, CNN became flat like I don't know what, as I was afraid it would.

I never liked that merger or even the idea of it.

And you know, I just don't see why merger ideas should even be conceived in secret?

Posted by: Bulent Sayin on January 7, 2004 10:55 PM

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>>she saw people online, assumed they were talking about the merger and IM'd them.>> Clearly an intelligence method much developed from the traditional one of counting cars at the VIP parking!

Posted by: Mats on January 8, 2004 01:49 AM

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What I don't understand though how could these secretive characters not have developed some protection against at least such elementary methods of, uhm, infiltration?

Posted by: bulent on January 8, 2004 02:46 AM

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The only thing this story is lacking is the executives using cryptic Away messages. "Buying books, cds, etc"

Posted by: tegwar on January 8, 2004 07:34 AM

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I think that Leopold and Mats have pierced the veil of journalistic pretence here. Still, she's entitled to some credit for having the moxie to get on AOL and "count the cars in the VIP parking lot."

Posted by: David Lloyd-Jones on January 8, 2004 07:54 AM

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