WEB 2.0 - AOL wanted to buy YouTube, CEO says

AOL unable to match Google's US$1.65b offer

AOL wanted to acquire YouTube but Google was the only company in a position to put together the US$1.65 billion all-stock offer that landed it the deal with the video sharing maverick, AOL's chief executive officer said Wednesday.

"Anybody [in the Internet space] who wasn't interested in YouTube was either asleep or not being honest," said Jonathan Miller, who is also AOL chairman, at the Web 2.0 Summit in San Francisco, responding to a question from conference chair John Battelle.

Despite being unable to bag YouTube, AOL is doing very well as it transitions from a paid-subscriber model to an advertising-supported model, Miller said, pointing out that AOL's ad revenue growth has exceeded the industry's growth in recent quarters.

In addition to its business model change, AOL is also reorganizing its structure to focus on products and technology, embracing open platforms and Web services, an evolution which will also be key to its future success, Miller said.

In the past, AOL has erred too much on the side of integrating its different products to simplify their access to users, at the expense of making those products outstanding, Miller acknowledged. That has changed. "The emphasis today is to make stuff great," he said.

Answering a question from a conference attendee, Miller said AOL has "learned a lot" from the privacy scandal that erupted several months ago after it released data about its search engine users. In particular, the incident has led AOL to look more closely at how it balances its desire to open up its platforms with the need to safeguard users' privacy, Miller said. The release of the search data was wrong, but it stemmed from a well-meaning intention to contribute to academic research efforts, Miller said.

The scandal erupted in August, after AOL posted on its research Web site about 20 million search records from about 658,000 of its members, covering the three-month period between March and May. AOL didn't disclose the names of the members, but it grouped each member's records with a unique number. This made it possible to see what each individual searched for. The data included search queries, as well as Web sites the members clicked on to.

AOL apologized and pulled the data from the Web site, but by then it had been downloaded and reposted in multiple Web sites. The records contain sensitive information like credit card, telephone and Social Security numbers, birth dates, full names and addresses. "It was obviously a bad call," he said.

Asked how AOL can compete in attracting engineering talent to its Dulles, Virginia headquarters when it is up against Silicon Valley powerhouses like Google, Miller said that AOL has operations worldwide and that talent exists globally. The challenge is to organize AOL in a way that it can harness that talent and offer those engineers an environment that they find attractive, he said.

Miller declined to comment when asked if parent company Time Warner would consider selling or spinning off AOL, now that AOL's reinvention is solidly in progress. In October, Miller was interviewed by a U.K. newspaper, which quoted him as saying that Time Warner is willing to engage in a discussion about a possible sale of spinoff for AOL. Without repeating the remarks attributed to him in U.K. article, Miller told Battelle he was misquoted.

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