Unless you're an investor yourself, the coverage of quarterly earnings reports is typically one of the most soporific rituals of business journalism. But last week's figures from America Online provided the occasion for a useful demonstration of the Rashomon effect at work in the media -- how different publications can look at the exact same numbers and draw entirely different conclusions.
Most of the press, like the New York Times, offered a favorable view of AOL's numbers: Under the headline, "America Online Reports Good Quarter and New Members," it declared, "America Online Inc. said yesterday that it had added another 821,000 subscribers in the last three months, as the company reported quarterly profits that matched Wall Street's expectations."
Over in the Wall Street Journal, the headline told a different story: "AOL's Revenue From New Sources Misses Expectations." The article began, "American Online Inc. posted a profit that matched Wall Street's expectations as revenues rose 49 percent. But the company's closely watched effort to develop new forms of revenue, including online sales and advertising, fell short of expectations."
Near the end of its story, the Times mentioned the disappointing e-commerce and ad sales results as "the one apparent weak spot" of AOL's quarter, and followed it with AOL chairman Steve Case's explanation -- that the company had adopted "more conservative accounting," spreading out revenue from multiyear ad deals rather than crediting it all up front.
What could be wrong with that? Lord knows enough people have criticized AOL for fast-and-loose accounting in the past. But the Journal article provides a key bit of historical context that most of the other press accounts missed: "When AOL went to flat-rate pricing last December, it said it would have to rely increasingly on revenue other than subscriber fees for its future profitability. That includes advertising revenue and fees collected from the sale of goods and services online."
In other words, now that AOL isn't charging customers by the hour, its business model will increasingly depend on ads and commerce -- making any weakness there pretty significant.
But wait -- there's more! The most thorough piece on the AOL situation wasn't a straight newspaper earnings story but a column on MSNBC's Web site by Jane Weaver -- who went out and talked to actual advertisers and drew the conclusion that AOL has "strained relations with the ad community."
"The word from digital Madison Avenue is that AOL needs to become more ad agency-friendly," Weaver writes. Now, when ad agencies say someone needs to be "more ad-friendly" that's often code for "they should give us a better deal." But the biggest complaint Weaver records is more reasonable: Advertisers say AOL "boasts about its 9 million subscribers" but "won't provide advertisers with detailed traffic reports." AOL execs didn't comment for the MSNBC piece, so we don't know whether this traffic-report jam is a result of the technological limitations of AOL's creaky, pre-Web technology -- or just "arrogance," as the ad execs suggest.
Weaver notes that AOL has had much more success forming partnerships with direct marketers like 1-800-Flowers and Amazon.com than it has had selling ad space through the traditional advertising agencies. But "big, exclusive multiyear partnerships depend on access to a limited amount of prime online real estate," she points out -- and when that runs out, AOL will need to court the agencies selling old-fashioned ads.
My point in digging through these details is not to seize an opportunity for gratuitous AOL-bashing, but to show how the game of spin control plays out on a relatively mundane story. The truth about AOL's quarterly results is surely more equivocal than the positive headlines in the Times -- or in Wired News, CNet's News.com, Inter@ctive Week and dozens of other publications -- indicated. But except for the Journal's more skeptical take, AOL got across the message it wanted: Our numbers are up! That's the kind of spin you can carry home to the bank.