The Washington Post broke a 11-page story about AOL Time Warner's accounting methods. I was expecting a smoking gun, but what I got was ambiguous at best. Certainly, AOLTW had motivation for diddling their ad revenue:
"Advertising was supposed to be the big thing to defray concerns about AOL plateauing," said Michael Bromley, a business development director for AOL consumer devices until he was laid off last year. "On Wall Street, it's not what you make, it's what you're perceived as."
But in reality, the Post came up with $270 million suspicious dollars of $5 billion in ad revenue (I get 5%, but AOL says it's 2%). The auditor, Ernst & Young, stands behind the financial reporting. The deals they examined raised questions certainly, but the most questionable of the deals examined by the Post, the eBay deal, is a similar to a model Merck used to deal with co-payments (whose revenue is it anyway?), and that story never really gained any momentum. The most interesting is the 24dogs.com deal which the Post treats as scandalous, but I think it demonstrates true creativity to turn a lawsuit into an income-producing business relationship. Shut up, I'm serious!
In a flurry of bad press, Bob Pittman has resigned. AOL Time Warner will replace Pittman, founder of MTV, with Don Logan, long time CEO of Time, Inc. Am I just jaded by the spectacular nature of WorldCom's fraud, or is the Post story not very interesting?