06/06/2009 05:12 am ET Updated May 25, 2011

Tim Armstrong Gets It Right, Silicon Alley Insider Gets It Wrong

In an interview with Advertising Age Editor Jonah Bloom at the AAAA Leadership Conference, AOL's newly appointed CEO, Tim Armstrong gave some insight into his plans for the beleaguered Time Warner unit. But you had to listen carefully to what he said to get a sense of what he was planning.

Many of the snarky blogs that follow Internet businesses, countless online industry watchers, and most current AOL employees listened poorly or with their usual confirmation bias and, thus, took away from Armstrong's remarks on the Ad Age video and from his subsequent personnel moves and communications something to reinforce their own prejudices, fears, and shallow thinking.

I'll pick on just one blog to make my point, but there are numerous examples of selective perception and confirmation bias that I could select in this current era of uninformed, personal-aggrandizing, opinionated, biased reporting on blogs, newspapers, and, especially cable news channels (Dobbs, Beck, O'Reilly, Hannity, Olbermann, Maddow, e.g.).

The influential Silicon Alley Insider is widely read by people involved in or interested in the online industry. The first word I received about Google's Tim Armstrong replacing the inept Randy Falco as CEO of AOL was in a Twitter from Silicon Alley Insider's Editor in Chief, Henry Blodget, and his blog has been on top of the story since then.

The Insider has been all over the Armstrong story like a wet blanket and has excellent inside sources. The Insider has published memos to the AOL staff about moves Armstrong is making, such as the memo he wrote on why he broomed AOL sales chief, Greg Coleman, and the memo AOL Platform-A sales chief Mark Ellis, sent out May 4, about using SalesForce to track calls.

The Insider's lead writer on most of the AOL/Armstrong stories is a 26-year-old editor named Nicholas Carlson, who, according to his LinkedIn profile, before he came to Silicon Valley Insider, was an associate editor at Nick Denton's gossip blog, Valleywag, and before that was a client associate at Merrill Lynch. Carlson wasn't at Merrill Lynch when his boss, Henry Blodget, was there. Blodget got banned for life from the securities business for touting Internet stocks in his analyst's reports that he thought were "crap," as revealed in private e-mails.

Carlson lists as an accomplishment in his LinkedIn profile as having won first prize in the Davidson College Vereen Bell creative writing awards for a short story, "Scrambled Eggs." Blodget was also a writer before he was an analyst - a freelance journalist after he graduated from Yale. Blodget proved he was a creative writer writing stock analyses for Merrill Lynch, and Carlson has shown he is a creative writer in his blogs about AOL, Armstrong, and Armstrong's new head of global advertising and strategy, Jeff Levik.

Carlson may be a good writer, but he has no clue about management, leadership, sales, or compensation theory or practice. In an Insider post titled "AOL"s Advertising Systems Overload" on May 4, Carlson wrote:

Memo to new AOL ad sales boss Jeff Levick: We have two quick things to slot in at the top of your to-do list:

1. Make it easier for ad sales people to sell premium inventory.
2. Create incentive for them to do it.

One big reason AOL ad sales were down 20% during the first quarter is that AOL sales people lean too much on the company's in-house, low-priced advertising network,, instead of pushing clients into higher-priced premium display advertising.

But even though this is bad for Time Warner's (TWX) online subsidiary, it turns out we can hardly blame the sales people.

Oh, Nicholas, you mean incentives like Merrill Lynch gave Henry Blodget to lie about stock he thought Merrill Lynch clients should buy and incentives that Merrill Lynch gave its brokers to churn clients' accounts to increase commissions, line their pockets, and screw their clients. Or like the incentives banks gave loan officers to make stupid loans -- incentives the government is now looking to regulate so that people who make loans only get incentive payments if the loans perform over a reasonably long period of time.

It was the mistaken notion that money is the only thing that motivates people that was the main cause of our current economic melt down. It was the wrong incentives that fueled the rapacious greed on Wall Street. But since Nicholas Carlson's only job before writing gossip was at Merrill Lynch, he has no other reference point for knowing about incentives other than those that incentivize greedy, unethical behavior on Wall Street.

Before you give advice to Tim Armstrong about incentives, Nicholas, I suggest you begin your education on incentives by reading Fredrick Hertzberg's classic Harvard Business Review article "One More Time: How Do You Motivate Employees?" and from there move on to my paper "Compensating Media Salespeople," which includes extensive references to research on the subject, and, unlike the HBR article, it's free.

And before you (and others inside and outside AOL) poke fun at Tim Armstrong for getting AOL employee's involved in writing a new mission statement, read some of the most highly regarded management books of all time, Collins and Porrass's Built to Last and Collins' Good to Great, and then you might understand why Armstrong is on the right course.

You and others who have no clue what Armstrong is doing look at the Ad Age video again carefully and you then might understand why he hired Jeff Levick, who understands how to create value by using analyzing data (read Competing on Analytics).

The odds of Levick and Armstrong improving on what Falco, Grant, and their string of inept cronies screwed up are huge. But, you wouldn't know that, Nicholas, your job is to write gossipy disses that get headlines, not to provide knowledgeable insight.