AOL soaks up Silicon Valley spirit to inspire new apps

AOL soaks up Silicon Valley spirit to inspire new apps

The former Internet darling, attempting a tough comeback, has a new strategy that goes beyond buying properties such as The Huffington Post and TechCrunch and building out its media presence with Patch, a network of struggling hyper-local news sites.

The scheme: Lease a building from Google in the heart of the Silicon Valley, let engineers go wild — just as they do at Google and Facebook — and hope it pays off with innovative new products.

"The space you work in is a reflection of the kind of company you are," says Brad Garlinghouse, AOL's president of the Applications and Commerce Group. "You get innovation," he insists, from "working in a space that's very open and doesn't have offices … where people can work together and play together."

For years, AOL has been trying to stem the erosion of its audiences by buying brands, introducing products and tweaking old ones. CEO Tim Armstrong has undertaken a number of high-profile initiatives to jump-start growth following the company's failed merger with and eventual spinoff in 2009 from Time Warner and the resulting hundreds of layoffs. But while AOL has been spending heavily to turn around its fortunes, its financial picture has yet to inch upward. In its most recent quarterly earnings report, AOL posted earnings of $4.7 million, down from $34.7 million, on revenue of $551 million, down from $664 million a year ago.

The mood at the 225,000-square-foot, three-story building here is more like that of a technology start-up. Employees are encouraged to draw on the walls, play pool and ping-pong, and come to work whenever they like. All they have to do in return is produce hot websites and mobile apps.

Across the street from Stanford University, AOL's West Coast campus is a technology facilitator. AOL occupies only about one-third of the new space. The rest was open initially rent-free to several start-ups, including e-mail management firm Xobni and feedback researcher Medallia. (AOL has begun charging rent.)