When AOL bought TechCrunch last September, the first question on everyone's lips was, "How long could Mike Arrington possibly last as an AOL employee?"
Yesterday, four months after the deal, we may have begun to learn the answer to that question. On Tuesday evening, for no apparent reason, Arrington threw public punches at AOL's crown-jewel technology blog, Engadget, and Engadget's editor, Joshua Topolsky.
Specifically, Arrington called Engadget "a plasticized caricature of a real blog" and blasted it for buying traffic through Google Adwords (which Engadget actually hadn't even done). Then, today in a tweet, Arrington appeared to call AOL itself "pathetic."* (Arrington says this word was not aimed at AOL, though we read it that way—see below).
Now, Michael Arrington has never hesitated to speak his mind, and that's one reason people read him and one reason AOL paid $25+ million for his blog. And AOL certainly must have expected that some of this would come along with the deal.
But to say that behavior like this is rare in the corporate world would be an understatement. Even fire-breathing personalities like Glenn Beck and Bill O'Reilly aim their flame-throwers outward—they don't torch their colleagues and the hand that feeds them. In fact, we cannot remember a single instance when a commentator has appeared to describe his employer as "pathetic" and remained an employee for long.
And that means that AOL may have a new problem.
When AOL bought TechCrunch, AOL CEO Tim Armstrong addressed everyone's big concern about the deal — Mike Arrington's future involvement — by promising that Arrington would be on board for at least three years. Armstrong also promised that TechCrunch would have control over its own content and be allowed to do its own thing. But does that mean there is no limit to what Arrington can say and do? Is there nothing that is unacceptable?
From what we hear, Arrington's bomb did result in a few phone calls to AOL senior management, but management does not appear to have regarded it as "crossing the line." Publicly trashing colleagues and the company, it appears, is fine with AOL's management, as long as it doesn't go too far. (And, of course, as with most such spats, it's good for pageviews.)
But what's fine in senior management's offices may not be fine in the editorial ranks. Not surprisingly, we hear Arrington's attack infuriated the Engadget team, which had just returned from working around the clock at the consumer tech show CES, where they produced record traffic for Engadget and AOL.
Sources familiar with Engadget's view of the situation say the site's managers regard Arrington as "crazy" and "beyond a loose cannon." Importantly, they also regard AOL's management as incompetent and unwilling to stand up to Arrington. And that could spell trouble.
Despite Arrington's visibility within the tech-business community, Engadget is a far larger and more valuable property than TechCrunch, and its editors can obviously choose where to work. If Arrington continues to haul off on them, it's not unreasonable to think that the Engadget employees might just say the hell with him and AOL and walk out the door.
Similarly, it's not unreasonable to think that AOL's thousands of employees and shareholders and customers who aren't named Mike Arrington will quickly tire of him trashing the company. The normal approach would be for senior management to tell him to cool it. But if AOL tries to do that, it will risk infuriating Arrington himself. And that might lead to more such declarations of independence — and, eventually, Arrington's departure from the company.
How it started
This isn't the first time Arrington flipped out over Engadget. The grudge, apparently, goes back quite a ways.
Back in December 2009, Engadget wrote a post about TechCrunch's lawsuit with Fusion Garage over TechCrunch's failed tablet, the CrunchPad, which was later renamed the JooJoo. The post cited a number of problems with how TechCrunch and Mike Arrington dealt with FusionGarage.
Arrington didn't like Engadget's analysis of the situation and he let AOL know. He fired off an email to the head of AOL News, Marty Moe, saying that JooJoo was "raping" TechCrunch, and that Engadget's write-up was "like you're watching a rape by the side of the road and saying, 'that chick was hot'."
Moe passed the email off to Engadget's editor-in-chief, Joshua Topolsky. Emails went back and forth. A source familiar with the exchange tells us it became clear that Arrington maintains "very personal animosity towards Josh." Several months later, AOL bought TechCrunch. Shortly thereafter, a source says, Arrington began telling people that Engadget staff and Topolsky had tried to torpedo the deal.
Topolsky flat-out denies this. He says, "Nobody at Engadget tried to stop the acquisition." He says this contention is "100% an invention in Arrington's mind, or it's totally fabricated."
Civil war in "tech town"
Today, more than a year after Engadget's story on the JooJoo, the two sites are supposed to be on the same team of folks working to help turn AOL around. In fact, thanks to AOL's latest re-org, they're actually both in the same "town." (AOL reorganized its editorial operations into "towns," and Engadget and TechCrunch are both part of "Tech Town.")
But Arrington keeps throwing shots at Engadget. Meanwhile, AOL management isn't doing anything about it, and this has the people at AOL's top tech blog (Engadget) furious with management. Their view is that Michael Arrington "thinks he can do whatever he wants and AOL is going to let him. Management isn't involved on this level of stuff. They've got bigger problems."
"AOL is a horrifically managed company," one source fumes.
Another source close to the situation suggests that Tim Armstrong and the rest of AOL's upper management should take Engadget's side in this fight.
"As an actual publishing entity, Engadget is way more important." Meanwhile, "TechCrunch has a small audience in a niche category. Tim likes it because it has cachet with all of his inside friends."
So, what's next?
When AOL bought TechCrunch, it was hard to imagine that the famously volatile Arrington would last for three years at the company. After this latest episode, it's even harder. We would not be surprised to see Arrington leave the company sooner rather than later. And although we're just speculating, we suspect that that may, in fact, be part of his plan.
Although the details of AOL's purchase agreement with TechCrunch have not been released, the consensus is that AOL used a three-year earnout designed to give Arrington and other TechCrunchers an incentive to stick around and do a great job. Based on various reports, we estimate that this earnout could likely amount to $10-$15 million above the original purchase price. $10-$15 million is a significant amount of money, even to Mike Arrington. We suspect, therefore, that even if Arrington gets bored or loathes working for AOL, he won't just quit—because that would mean walking away from this cash.
If AOL management gets tired of Arrington's behavior, meanwhile, they presumably can't just fire him, because this would likely trigger a full payment of the earnout. To can Arrington and avoid paying the earnout, AOL would likely have to fire him "for cause." And given that this behavior is par for Arrington's course, it would be hard to argue that it constituted "cause".
So, it occurs to us that if you were Mike Arrington and you wanted to leave AOL but you also wanted to get your money, you might start throwing punches at your own colleagues and company. And you might keep throwing them until, in the interest of pacifying those colleagues, management would have no choice but to pay you to go away. We have tremendous respect for Mike Arrington's intellect, and we imagine that this tactic has occurred to him!
So is this the beginning of the end?
We wouldn't be surprised if it was.
We can't imagine that Mike Arrington is just going to be a good corporate citizen for another three years to get his earnout. We assume he has no interest in being under AOL's thumb, and we would not be surprised if the shot at Engadget was his first step toward the door.
Meanwhile, AOL's management has some pacifying to do at Engadget, which is more important to the company's bottom line than TechCrunch. Bottom line: There's trouble in "Tech Town."
* The tweet in which Mike Arrington appeared to call AOL "pathetic" came at 2:14 eastern time this afternoon:
My guess is AOL rolls over on this whole salescrunch bullshit. Back in the day, though, I wouldn't have. pathetic.
We all interpreted that tweet as trashing AOL for being too wimpy to sue the ass off a company called "SalesCrunch," which Arrington apparently feels has infringed on the TechCrunch name. We asked Mike about the tweet, and in an email he said that the "pathetic" was aimed at SalesCrunch, not AOL. He also added that "AOL can be plodding and conservative, but they aren't pathetic by any means."