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A Look at the Rise and Fall of AOL

By Edited Oct 31, 2016 1 2
AOL headquarters sign
Credit: Leigh Goessl/All rights reserved

Sign located in Dulles, Va. at AOL headquarters

America Online emerged as a technology powerhouse back in the 1990s. As people across the globe got "connected", without a doubt this Internet company dominated the scene. AOL had  officially been "born" in the 1980s under the name Quantum Computer Services. It later changed its moniker to America Online (often referred to as "AOL" which later became its official name) and it didn't take long for the company to gain the distinction it enjoyed for many years during the heyday of early online computing.

Through dial-up modems, which were used in conjunction with phone lines, every day millions of people worldwide logged onto the network and sent emails, read up on the latest news, engaged in its popular chat rooms and shared conversations on its bulletin boards. AOL quickly became a favorite pastime for people. The phrase, "You've Got Mail" became synonymously associated with the Internet. The phrase even became the title for a 1998 movie that told the story of a couple who met online. 

During this time frame it seemed the company was on top of the world. And it was. Led by one of its founding members, Steve Case, America Online quickly became the dominating company in an increasingly Internet-connected world. However, that reign at the top would not last. A series of events led to AOL's eventual downfall.

Overburdened with Users it Couldn't Support

America Online had the brilliant idea to send out free disks to the public with a free trial period to join. While it is not certain how many were sent during this very prominent marketing campaign, it worked. Most people probably remember being bombarded with floppy disks and later CD-Roms. There were so many extras, people often ended up using the latter as tabletop coasters for drinks.

Box of AOL CDs ready to be mailed
Credit: Jeramey Jannene on Flickr/CC by 2.0 with Attribution

As a result, the network became bombarded with users, and it was not equipped to handle the surge in demand. As Tech Hive notes, busy signals when dialing in were not uncommon and a huge outage in 1996 left many people frustrated. 3 I myself can attest to the evening busy signals I used to frequently get. Eventually, more local lines were added and people could log in without costly long-distance telephone fees.

Another problem was users were frequently "booted" offline. While AOL would improve on this as it later integrated high speed Internet, the inconsistent service was a reputation the company would carry for years.

Merge with Time Warner

In 2001, America Online merged with corporate giant Time Warner and the company was renamed AOL Time Warner. At the time it was hailed to be one of the best business deals ever. Strategically, corporate leadership believed they could create the world's largest online information and entertainment company. That perspective would not last. In time, everyone realized what a colossal mistake that deal had been. In 2002 AOL Time Warner lost a staggering $99 billion. 4  In addition to these financial woes, people began leaving the service in droves, moving to other providers and/or using free email accounts offered by Web companies.

AOL was spun off back into its own entity in 2009. In 2010, Time Warner's CEO Jeff Bewkes called the company's merger with AOL "the biggest mistake in corporate history". 5

Slow to Embrace the Web

Perhaps a level of complacency also contributed to AOL's demise from the top of tech companies. As people flocked to free web-based services, AOL leadership appeared to hold firm in its belief that people would continue to pay for Internet and Web access in an exclusive community. They were sorely mistaken. The market was heading into one of integration and open sharing. Over time AOL did begin to redevelop its platform to become more compatible with Web services, but it seems they waited too long. In the meantime, the concept of sharing became the next generation of the Web. Although, I can see why AOL may have waited a bit, I remember this well as I was helping moderate on the AOL bulletin boards at that time. Many long-time users did not like the idea of shifting to the web. However, times they were a changin' and it was beginning to happen fast.

AOL did ultimately make the switchover to be compatible with the rest of the web, but was it too late?

Competing in a New Internet

While AOL was banking on customers sticking with its elite and proprietary service, a little company called Google, along with other companies emerged with innovative and new business models. Why would people continue to pay for AOL?

Couple that with the fact when people tried to cancel service, the company became notoriously known for aggressive customer service techniques, either offering free months of service not to cancel or simply not following through on customer requests. In 2010, the company celebrated its 25th anniversary. While the company is still afloat, it is does not hold the dominating presence it once had. At its height, it had about 27 million members, as Technologizer reported in 2010 in its article "A History of AOL, as Told in Its Own Old Press Releases". 6

Compare that with the 1 billion+ membership Facebook currently has in its user base.

Not to mention recent rumblings are indicating there is new talk regarding a Yahoo! and AOL merger. 7 If this really happens remains to be seen, it is not the first time this has come up and probably not the last. However, at this time it appears unlikely if media reports are any indicator. However, with many previous acquisitions, including the Huffington Post and TechCrunch to name two, and more smaller companies since those deals (the most recent being an ad marketing company in spring 2014 for $89 million), it seems AOL is not ready to toss in the towel just yet. Under new leadership since the height of AOL's reign, to date the Dulles, Va.-based company is seemingly trying to reinvent itself once again.

The Internet has gone through so many changes since those early dial-up days. Some companies have successfully navigated the highly competitive tech waters with updates to stay viable while other companies have disappeared.

Perhaps the big question is, can the once-mighty AOL succeed and continue to keep up?

Were you a member in the early AOL days, what do you think of the company then vs. now? What about its future?

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Comments

Jan 8, 2015 10:23am
WriterJoanne
Yes I was an early member. I remember getting a disc in the mail and was so excited to get online. I had forgotten all about those chat rooms!

So glad the dial up days are gone. Can't imagine not having high speed internet now!
Jan 9, 2015 2:43am
LeighGoessl
I still remember when it was all new and I'd get thrilled to hear that buzz noise right before connecting and hearing "You've got mail" (and the bummer when the line is busy would pop up lol).

Times really have changed! Thanks so much for commenting Joanne :)
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Bibliography

  1. "AOL." The Free Dictionary. 22/12/2014 <Web >
  2. "AOL has a strong strategy, a clear mission and a firm commitment to delivering value." AOL. 22/12/2014 <Web >
  3. "20 Years of AOL Annoyances and Foul-Ups." Tech Hive. 22/12/2014 <Web >
  4. "AOL Posts Record $99-Billion Loss." LA Times. 30/01/2003. 22/12/2014 <Web >
  5. "AOL merger was 'the biggest mistake in corporate history', believes Time Warner chief Jeff Bewkes." The Telegraph. 10/09/2010. 22/12/2014 <Web >
  6. "A History of AOL, as Told in Its Own Old Press Releases." Technologizer. 24/05/2010. 22/12/2014 <Web >
  7. "Are AOL and Yahoo really thinking again about merging?." CNBC. 14/12/2014. 22/12/2014 <Web >
  8. "AOL Buys Online Marketer Tool Convertro for Nearly $100 Million." Wall Street Journal. 14/12/2014. 22/12/2014 <Web >

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