With Garlinghouse Out, Questions Over What Is Next For AOL

Brad Garlinghouse’s abrupt departure as the president of applications and commerce at AOL (NYSE: AOL) raises questions not only about how effective AOL has been in tackling the two areas where it plays today — technology and content — but also about what comes next for the business divisions that reported to him. A look at one, mobile, could give some insight to what might be happening elsewhere.

AOL Mobile and AOL’s VP of mobile, David Temkin, reported directly to Garlinghouse and was based in the same office as him in Silicon Valley, far from AOL’s HQ in New York.

Just by coincidence, I interviewed Temkin a week ago when he was in London. (You can read about that and watch the full interview here.)

During our conversations over a couple of days, and on stage, Temkin highlighted to me what he saw as the technology push at AOL, and the content push. His position was that AOL’s content investments are all fine and well, but that there could and should be more development in technology, too — and specifically media-based technology.

He pointed to the recent launch of the Editions iPad as one example: this is AOL’s news aggregating app that is essentially laid out like a magazine and “delivered” daily to readers; and he cited the company’s streaming music app, Play. Both of these are not based directly on content owned by AOL but are about harnessing ways of consuming content — both AOL’s and content owned by third parties. “There’s more of that to come,” Temkin promised me.

AOL under Tim Armstrong has had an ambivalent relationship with its mobile efforts: Armstrong has always championed how important it is, but up to now, it’s not been the thing that you think of when you say “AOL.” Temkin’s comments implied a kind of momentum building to me — so the departure of Garlinghouse, a mobile champion, throws up questions of whether that momentum will continue or be stalled indefinitely.

GigaOM, which broke the news of Garlinghouse leaving, implies that Garlinghouse was on the same page as Temkin, with a focus on developing technology services at the company — a contrast to the efforts at AOL HQ, which have been focused on content investments. A source tells us that the two worked closely together.

Temkin admitted that new initiatives in apps and mobile advertising were not yet profitable but that he thought that a recent change in how ads are booked at sold at AOL — finally using a common platform — could change that and put it into the black by next year.

Will Artie Minson, the CFO of AOL who is taking over Garlinghouse’s responsibilities, have the patience to wait to see if that bears out?

A side note about Minson: In addition to being the company’s CFO, he also manages another “technology” product for AOL, its dial-up business. Even with the huge takeup in broadband, the company still, remarkably, has 3.4 million subscribers paying $17.50 every month to access the internet via AOL’s dial-up services. That works out to $59.5 million per month in revenue.

In a company that may be seeing precious few dividends coming from other parts of its operations, that sum looks particularly attractive, and we may see Minson, if he continues to operate the division longer term, re-jig operations to try to yield more returns like this. We noted one that exists already: the carrier deals that AOL has to provide AIM via text messages, which already mean that AOL Mobile is a profitable operation. Minson, if he remains in the role longer-term, may try to look at how AOL could align others products in a similar way.