Analysts: What Armstrong’s Move Means For AOL, Google; Advertisers: Can Anyone Turn AOL Around?

Analysts this morning have started to weigh in on Tim Armstrong’s move from Google (NSDQ: GOOG) to AOL (NYSE: TWX), and the consensus is that it’s a modest negative for Google and a positive sign that Time Warner is moving closer to spinning off AOL entirely.

Time Warner has struggled for years to define the course of AOL (and made a lot of management changes along the way), and most analysts agree that Armstrong wouldn’t have made the jump if he didn’t think the right structure would be found, specifically spinning off AOL into a separate public company. (That’s exactly what our Staci Kramer said in her piece yesterday.)

Merrill Lynch analyst Jessica Reif-Cohen said Armstrong’s addition combined with the recent hiring of Yahoo (NSDQ: YHOO) executive Greg Coleman to run Platform-A should help AOL better monetize its traffic, which it has struggled to do despite consistent audience growth in its content properties.

Merrill’s Justin Post said the hire would also be a positive for the Google/AOL partnership since Armstrong played a major role in getting the deal done and knows how to get the most benefit out of that deal for AOL. Post also cautioned investors not to expect AOL to be spun into a separate public company anytime soon — even if it is in the cards — given how poor the stock market is performing.

As for Google? Most analysts believe Armstrong’s departure may weigh on Google’s stock in the near-term, but won’t have any long-lasting negative impact on the company. Barclay’s Doug Anmuth notes that Armstrong is the most senior executive to leave Google since it went public in 2004, while Post didn’t see any connection between Armstrong’s exit and weak business fundamentals at Google (agreeing it is more about the opportunity to run AOL). Post also points out that the Google stock may have already weathered any short-term impact from the move because of the recent rumors Armstrong was a leading candidate for the Yahoo CEO position filled by Carol Bartz. Finally, Post believed Google should not have many problems replacing Armstrong with an equally competent executive.

David adds: Armstrong is almost universally liked and respected by ad industry execs. And so he, comes in with a great deal of confidence at his back. But there is some concern about whether even someone as well organized as Armstrong can fix the problems at AOL. For the most part, industry execs praise Armstrong as having terrific sales acumen, but those skills are naturally attuned to search ads, not display, which is AOL’s format.

David Kenny, managing partner, Publicis Groupe’s VivaKi, which has worked with Google as part of the companies close partnership over the the past year, also pointed to Armstrong’s abilities as someone who knows who to shape an organization first and foremost. Kenny: “Tim built a great team at Google, and really worked hard to find the wins for publishers, advertisers, and agencies. He has a great sense of generosity, and built his business by helping others build their businesses. He has both the intellect and the empathy to create a new model, and I am most grateful for our partnership. If anybody is up to the challenges at AOL, it’s Tim Armstrong. And I think it’s great to see him have oversight of the whole business and products — we’re optimistic about what they can bring to our clients.” Asked about how he would work with the newly-installed Platform-A President Greg Coleman, Kenny added, I know that he and Greg have a strong mutual respect, so I am sure they will be a good team. And Tim has a way of getting the best out of people.”

Sarah Chubb, president, Condé Nast Digital, called Armstrong’s hire “a huge coup for AOL,” and added that he did a brilliant job of putting an “advertiser-friendly, collaborative, easy-to-understand face on Google” — a particular challenge for Google’s engineering/tech culture. “Now they are considered probably the world