How a bundle of joy became AOL's scapegoat

Ultimately what a media company sells is access to, and understanding of, people.

Advertisers use media companies to reach their target audience, and often rely on them to provide insights into what their preferences are, how to most effectively reach them, and the tone to take.

This is generally what distinguishes a good media company from a great media company: an innate knowledge of their audience.

AOL is a media company. Albeit a smaller one that it once was. But it’s still a media company.

It relies on advertising for a large chunk of its revenue, and given its legacy as a dial-up internet service provider, its future basically depends on it.

And like many media companies, it peddles its understanding of its customers and internet users in general as one of its competitive advantages – one of the elements that makes it valuable.

You have to wonder how a company that trades on its understanding of the social pulse could make two such monumental-sized missteps as AOL did within a few days last week. Missteps so significant it made many wonder whether the company was, in fact, completely disengaged from society in general.

Let me explain.

Last week AOL chief executive officer Tim Armstrong decided he would cut back AOL employees’ 401k benefits. Armstrong, who took home $US12 million in 2013, blamed Obamacare for the cut, making claims that the initiative was costing AOL an additional $US7.1 million per annum in costs.

Armstrong continued with his explanation.

“Two things that happened in 2012. We had two AOL-ers that had distressed babies that were born that we paid a million dollars each to make sure those babies were OK in general. And those are the things that add up into our benefits cost. So when we had the final decision about what benefits to cut because of the increased healthcare costs, we made the decision, and I made the decision, to basically change the 401(k) plan.”

When you need a scapegoat it seems, blaming distressed babies is now an easy option.

Understandably, the internet went into meltdown. After all, Armstrong is an easy target. This is the guy who fired an employee on a conference call for taking photos of a company all-hands.

Deanna Fei was the mother of one of these bothersome “distressed babies” (her husband is an AOL employee), and she wrote a must-read op-ed on Slate explaining what had happened to their family. In her words her family “experienced exactly the kind of unforeseeable, unpreventable medical crisis that any health plan is supposed to cover. Isn’t that the whole point of health insurance?”

Well, yes, it generally is.

Right in the eye of the “distressed babies” storm, AOL made another misstep - it wheeled out this guy to do some PR on cable business news provide MSNBC. His name is David Shing and he is AOL’s “Digital Prophet”.

What a digital prophet does I am unsure. I have searched Google to find a position description but it appears Shing is the world’s only prophet of 0’s and 1’s.

Shing’s role is to provide prophecies around the future of digital advertising it appears, which seems to mean talking rapidly in buzzwords and making predictions based on minimal facts (often with dramatic music soundtracks). In his defence, digital advertising is littered with people similar and he is really a product of advertisers and media embracing these sorts of evangelists. It’s not quite as exciting to predict that the future will most likely be an evolution of the past.

Again, the internet went into meltdown, with large chunks of the digital advertising community mocking this prophet and looking to distance their ‘predictions’ from his ‘predictions’. Many pointed out that Shing is perhaps illustrative of many of us who work in digital advertising – heavy on opinion, light on facts – albeit with louder hair. Maybe that’s true.

But for Joe Average, who is removed from the buzzword-laden world of ‘consumer connections’, it created a conundrum: here was a company in AOL claiming it needed to cut back its employees’ benefits due to two “distressed babies”, but at the same time could pay someone good money to do a role that for many would be seen to provide no tangible value to anyone or anything.

It could across as an act by a company out of touch with society and common sense.

Exactly the two things a media company generally needs to be successful.