Eight Years After Disastrous Merger, AOL Splits From Time Warner

It will probably go down as the single worst merger in communications history. When Time Warner and AOL tied the knot in 2001, CNN founder Ted Turner, Time Warner’s Vice Chairman at the time, called it "better than sex, " according to USA Today. Though the deal was then valued at $163 billion, AOL's value when it spins off on December 9 is likely to be less than $3.5 billion.

What went wrong? Just about everything. The merger that was supposed to "herald the future of content distribution via the Internet" was bad from the beginning. It was hampered by everything from a genuine culture clash, to incompatible business models, to nagging problems with the Justice Department and the Securities and Exchange Commission.

AOL, the once-stellar online brand, stumbled and became a shadow of its former self as the rise of broadband and wireless Internet drew customers away from the subscription-based ISP/content model, while Time Warner had its own brand battered -- Time Inc. has suffered along with the rest of the magazine industry -- and bled red ink.

Tim Armstrong, a former Google executive who was named AOL's chairman and CEO last March, is expected to get a newly independent AOL on track. It won't be easy. "He needs to sell to investors that AOL can recover and be relevant," says Colin Gillis, an analyst at technology research firm Brigantine Advisors.