AOL fraudulently inflated advertising revenue through accounting schemes

Evidence

Finally, when these methods failed to produce enough revenue to meet the aggressive targets set by Pittman, the business group would resort to “special deals.” For example, money owed AOL for other reasons might somehow be accounted as “advertising revenue.” Sometimes, pre-booked advertising contracts were recorded twice, even though the revenues would have already been booked. In a pinch, AOL might also take a “barter” deal from a dot-com start-up, counting the barter—usually worthless web services—as revenue. As a last resort, it would just find ways to pay companies to place ads. While the methods of accounting fraud are myriad, AOL seemed to find ways to practice most of them. We know all of this because the Securities and Exchange Commission would eventually charge the firm with knowingly executing a scheme “to artificially and materially inflate the company’s reported online advertising revenue.” But by then most of the earlier executives had already taken their money and run. — Tim Wu, The Attention Merchants, 738

Categorization

• SEED: Essay angle: the structural pressure of advertising revenue targets that drove accounting fraud at AOL — a cautionary archetype for how attention-vendor incentives corrupt measurement.
• XREF: connects to: AOL overtook both rivals by rejecting censorship and the ad-based model — Tim Wu, The Attention Merchants, 722; AOL grew advertising revenue to $2 billion partly via a scheme called Project Confidence — Tim Wu, The Attention Merchants, 729