Engadget Defection Exposes AOL’s Major Weakness

Over the past few weeks, a steady stream of writers and editors have jumped ship from the AOL (s aol) site Engadget, and on Sunday, it became obvious this mass defection was more than just coincidence. The site’s entire senior staff has joined SB Nation, a media startup focused (for now at least) on the sports world, where they are planning to create a new gadget-oriented site. This news does two things: It reinforces how SB Nation could become a significant player in the media space, and it shines a spotlight on one of the major weaknesses in AOL’s growth plans.
Even before he left AOL, it seemed obvious Editor-in-Chief Josh Topolsky wasn’t comfortable with the new direction CEO Tim Armstrong was charting, particularly the so-called “AOL Way,” which was revealed in a series of slides from an internal presentation, and involved quotas for page views and a search-driven strategy that screamed “content farm.” The Engadget editor made it clear at the time that this approach would not apply to his site, but it came as no surprise when Senior Writer Paul Miller quit, citing the new AOL directives as a major factor in his departure. Miller said:

It doesn’t take a veteran of the publishing world to realize that AOL has its heart in the wrong place with content. As detailed in the “AOL Way,” and borne out in personal experience, AOL sees content as a commodity it can sell ads against.

In a blog post published after the SB Nation news broke this past weekend, Topolsky also took some parting shots in AOL’s direction, saying:

SB Nation believes in real, independent journalism and the potential for new media to serve as an answer and antidote to big publishing houses and SEO spam.

Arianna Huffington, who took over control of AOL’s editorial direction shortly after The Huffington Post was acquired for $315 million in February, has said in interviews — including one with a deeply antagonistic New York Times (s nyt) writer in that paper’s Sunday magazine this weekend — that the quota and search-driven strategy outlined in the “AOL Way” document is not the approach she plans to take. She has talked about letting authors be guided by their passions, and AOL has been getting rid of freelancers and hiring more staff writers in what appears to be an attempt to become more professional.
The biggest problem for AOL, however, is that doing this — and moving away from the content-farm approach — is likely to make the company’s content operations a lot more expensive, and that’s not something the cash-strapped former web portal can really afford. And whether Huffington likes it or not, her CEO does seem to see content as just a commodity to wrap advertising around.

The departure of the Engadget staff highlights another problem as well, which is that anyone who achieves a certain profile or status as a writer within AOL is probably going to start looking around for a better deal. This isn’t something that is unique to the former web giant, of course. All content companies suffer from the same kind of problem, since their main assets — the writers or creators of their content — are fungible and can leave at a moment’s notice. But AOL is in a particularly tenuous position because its content-focused strategy is so new, and suspicions about its true motivations (i.e, search-driven content farming) are so high. Firing hundreds of writers, as AOL did recently, also doesn’t really endear you to your staff.
The other interesting aspect of this news is that it clearly marks the rise of SB Nation as a substantial player in the online media space. The company started as a group of hyper-focused sports blogs co-founded by Daily Kos founder Markos Moulitsas Zuniga, and in 2008 added CEO Jim Bankoff — a former AOL executive, and one of the architects of the company’s original acquisition of Engadget. Over the past three years, Bankoff has built a substantial business while staying largely under the radar.
The company recently closed a $10.5-million funding round from heavyweights Khosla Ventures and Accel Partners, and it seems obvious Bankoff plans to use that financing to expand his operations in new areas. Anyone who thought the company was just going to focus on sports and leave the rest of the web-content game to AOL and Yahoo (s yhoo) should probably revise their thinking pretty quickly.