In 1993, AOL initiated an ambitious effort to get Americans online. They sent out millions of 3.5-inch floppy disks with instructions on how to physically connect computers to the Internet and pay an hourly subscription fee.
At its height, AOL was an influential $350 billion tech juggernaut that dominated internet connectivity, email and instant messaging services. But what went wrong?
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What Happened to AOL?
America Online was an iconic Internet service provider during the early ’90s. Known for providing dial-up Internet service and pioneering instant messaging and chat rooms, AOL Mail and AIM became household names that defined Internet connectivity for millions. Tech blogger Brian McCullough famously called them its crown jewels.
Established as PlayNET in 1985, AOL initially focused solely on connecting gamers and computer enthusiasts to multiplayer games via an Internet protocol known as telnet. But quickly expanded into other areas like news and entertainment; becoming the first service to offer proprietary software platforms with chat features in 1991 before adding Internet access as a service in 1993.
At the end of the ’90s, AOL boasted more than 9 million subscribers; however, as Internet usage was changing quickly. By 2005, blogs and other rapidly updated sites had become popular and AOL began feeling competition from newer companies that provided users with better user experiences online.
Jan Brandt recognized this and set her sights on expanding AOL’s customer base by sending free trial disks of AOL to anyone who requested them. Her strategy proved highly successful: subscriber growth accelerated dramatically while market share jumped from low single digits to over 18%.
But AOL’s growth did not come without complications. In 2000, for instance, they were sued over using technology which prevented people from connecting to other Internet services – this settlement cost them $15 million.
Internal issues arose as well. In 2002, a Washington Post investigation revealed that many AOL advertisers with long-term contracts had gone bust as part of the dot-com bubble; some, such as bicycle shops and online sporting goods stores owed millions in debts; however, AOL concealed these losses to preserve its stock price.
In 2009, AOL was acquired by Verizon and now operates as a subsidiary. AIM remains available, along with email and chat functionality and various web-based services; however, DSL service has since been discontinued and many subscription accounts converted to free email accounts.
In 2000, AOL and Time Warner joined forces in what was then one of the largest business mergers ever. The deal was designed to enable AOL’s transition away from dial-up internet access into digital content distribution – charging subscription fees for online services and earning revenue through distribution of Time Warner media properties such as CNN and HBO, publishing houses such as Time Magazine and Sports Illustrated as well as music companies like Warner Bros.
However, AOL and Time Warner’s partnership was short-lived. Just months after closing their merger deal, the dot com bubble burst and AOL saw its business model disintegrate as dial-up Internet was replaced by faster broadband Internet connections; its value dropped precipitously and advertising dollars vanished into thin air.
As part of their strategy to compete with broadband providers, AOL began providing free services such as instant messenger and AOL mail – this strategy proved disastrous when millions of subscribers abandoned AOL, leading them to reduce costs drastically and change its name from America Online (AOL) to just AOL in 2006. Furthermore, they even gave away AIM and AOL mail products without charging users anything extra!
But despite this failed merger, Steve Case and his team at AOL managed to form an impressive technology company that continues to flourish today. AOL was ultimately purchased by Verizon in 2015 and combined with Yahoo to form Oath digital media division.
At its height, AOL was one of the world’s largest media companies in history, dominating email, internet connectivity, news, and chat on an unparalleled scale. However, as consumers shifted away from dial-up modems towards broadband internet services like DSL or cable modems its market cap plummeted precipitously until 2009; its value had plummeted all the way down to $5.5 billion as a result of an unfortunate merger with Time Warner as well as numerous missteps such as purchasing Bebo for $1BN as well as buying Web 2.0 sites which lost money upon acquisition.
AOL was plagued by serious issues before its merger, as AOL struggled to adapt to a world where Internet users were transitioning away from dial-up modems toward broadband connections. Compounding their woes were dot-com bubble burst lawsuits and an inability to integrate its broadband offerings into cable providers’ offerings.
AOL’s falling subscriber numbers have had a detrimental impact on its search advertising business and free email accounts and software offered free by AOL; now competing against larger players like Google, Yahoo and Microsoft for consumers’ business.
In addition, AOL has been the subject of numerous billing practice lawsuits. Following one such class action lawsuit, AOL modified its method of charging its service; rather than charging users based on total connection time alone, instead billing for each hour-long increment used instead. While this move proved beneficial, future class action lawsuits would further diminish financial performance at AOL.
Though AOL has encountered financial challenges over its history, the company has continued to offer an impressive variety of entertainment and news content. AOL now functions as a brand-led company investing in experiences aligning with their mission while having global reach – its content includes TV/digital video programming/music platforms/local language platforms/mobile apps used by millions worldwide, as well as being part of family lives around the globe.
At its height, AOL had over 200 million subscribers. Millions of CDs were sent out with email, Internet connectivity, chat services and news services to its users worldwide.
But AOL wasn’t prepared for the rise of broadband and a new generation of web users; its cumbersome desktop software proved difficult to use, while its subscription model quickly became outdated as social media, blogs, and fast-updating websites began flourishing during this period.
AOL was burdened by debt and failed mergers and acquisitions. By the time of its split from Time Warner in 2008 and acquisition by Verizon seven years later, AOL had become nothing but a shell of its former self.
AOL still boasts several million dial-up subscribers, but that number represents just a small part of its 210 million active email accounts. Shutting down those accounts would cause considerable outrage; some users have used AOL for decades.
No reason exists for those users to switch quickly; they likely enrolled with AOL because their internet provider did not offer enough bandwidth to handle another platform.
Even through its troubles, AOL had some bright spots. AIM became an instantaneous hit; revolutionizing how millions of people communicate online — from nostalgia-inducing conversation about video games to business communications and courtroom dramas.
AOL had become one of the web’s premier websites, boasting some of the most recognizable domain names such as Huffington Post, TechCrunch, Yahoo Finance and an impressive array of media and technology properties.
But the company ultimately failed due to being unable to adapt to the shift from dial-up internet access to broadband internet connectivity, and several poor decisions such as its disastrous merger with Time Warner and acquisitions such as Netscape and MapQuest that put them on their downward spiral. Now known as Oath, their former glory has long since faded.