AOL: The Rise and Fall of the First Internet Empire

AOL: The Rise and Fall of the First Internet Empire

Imagine what it’s like to be the Google
of your generation, to have a near-monopoly on one of the most innovative industries of
your time. You’re at the top of the world and somehow,
you manage to screw it all up and you fade into oblivion. This is exactly what happened in the 1990s
with AOL, the godfather of the internet. The world during the early 1980s was a very
different place. There was no internet, and so most computers
lived in isolation. The few computer networks that did exist at
the time were available only to a select group of scientists and tech wizards. Starting an online service back then was an
immense endeavor, but in 1983 Bill von Meister thought that he was up to the task. He created GameLine, a service that let you
rent video games for your Atari twenty-six-hundred console through a dial-up connection. The service was innovative for its time, but
it was doomed from the start, for 1983 was the beginning of the great video game recession
that nearly destroyed console gaming. The industry shrank by 97% in the span of
just two years, and by 1985 Bill von Meister’s company was pretty much dead. He left the company and moved on, but his
former marketing director, Steve Case, wasn’t ready to give up just yet. He and several of his now unemployed colleagues
adapted the GameLine infrastructure for the Commodore 64, one of the most popular computers
at the time. They rebranded the service as Quantum Link,
and rapidly started expanding its functionality. Pretty soon it was no longer just a gaming
network, but a proto-internet in itself. You could chat, send emails and files, and
even read the news. Unlike the console market, which was on life
support at this point, the computer market was doing great and so Quantum Link became
very successful. So successful, in fact, that Steve Case got
approached by Apple, who wanted a similar service for the Apple II. Steve was more than happy to oblige, and the
end result was AppleLink, created in May 1988. Three months he unveiled PC Link, for the
computers compatible with the IBM PC, which we’ve covered in a previous video. PC Link took advantage of the rising wave
of IBM-compatibles, and so it did great. The Apple deal, however, went sour after Apple
couldn’t migrate their data from their previous servers. Luckily, the contract had a penalty clause
worth $2.5 million, which Steve Case was more than happy to take. He used it to consolidate and rebrand his
service, and thus, in October of 1989, America Online was born. Steve saw the rising popularity of Microsoft
and promptly released AOL versions for DOS in 1991 and for Windows in 1992. One year later, AOL finally started offering
access to the public Internet. Dial-up Internet access became the bedrock
of the company, and it fostered a generation of Internet users who grew up with the sound
of this. By June 1993 AOL’s dial-up service had amassed
300,000 subscribers, making it the fourth largest in the US. Unlike the other providers, however, AOL’s
user base was growing exponentially thanks to their extensive marketing campaigns. CompuServe and the other providers were trying
to cater to a small audience of advanced tech users, whereas AOL focused on people unfamiliar
with technology. They’d frequently partner up with rural
news publications and services dedicated to the elderly. By September 1993 AOL had added another 50,000
subscribers, and then another 50,000 just one month later. By January 1994 they had over 600,000 subscribers. Their revenue doubled every 12 months and
Steve Case was suddenly found with more money than he knew what to do with. He decided to throw it at his marketing team,
which was led by the legendary Jan Brandt, one of the most audacious marketing experts
at the time. She figured out an ingenious way of promoting
AOL. Instead of charging for both the software
and the dial-up service, like CompuServe did, Brandt would offer AOL’s software for free,
and she’d try to ram it down the throats of as many people as possible. To that end she began one of the most expensive
marketing campaigns in history. At first she dumped a quarter of a million
dollars on floppy disks, which she then mailed to every PC user whose address she could get
her hands on. Floppy disks were already on their way out
though, and soon she started buying CDs instead. For every new subscriber she’d buy $35 worth
of new CDs and she’d mail them out, which would bring in even more subscribers, and
on and on and on until by the end of 1995, just two years into her campaign, she had
overseen the addition of 4 million new subscribers. At this point mail was no longer enough. She signed partnerships with magazines, retail
stores and universities across the country to hand out AOL CDs. Pretty soon you would start to see them everywhere;
on the cover of your favorite magazine, in the box of your morning cereal, even in your
cafeteria menu. Jan Brandt had successfully created the real-life
version of pop-up ads in a time before AdBlock. CompuServe and the other providers just couldn’t
keep up. They made a last ditch effort to survive by
switching from an hourly charge to a monthly subscription. AOL followed suit in December 1996 though,
and that put the final nail in the coffin for CompuServe, which they absorbed one year
later. The change to a monthly subscription, however,
came with a dangerous side effect. AOL had already amassed 9 million subscribers
by that point, and now suddenly all of them could be online for as long as they wanted. The result was an overload of epic proportions. AOL’s infrastructure could not maintain
these levels of traffic and so it crashed frequently, leaving subscribers with the dreaded
busy signal. AOL were installing as many as 30,000 new
modems every month, but even that wasn’t enough. To fix their traffic issues they ended up
spending $700 million, most of which came from Jan Brandt’s marketing budget. Despite the end of the CD spam, however, AOL’s
growth was relentless, and at 15.1 million subscribers it was now the internet provider
to over half of all Americans. To expand their arsenal they bought ICQ, the
most popular chat service at the time, in 1998, and one year later they snagged Netscape,
the famous internet browser. The Netscape devs were a sneaky bunch, however,
and they made their source code public just before getting sold. At the turn of the new millennium, AOL were
at their peak. They had 26 million subscribers and they looked
unstoppable, but then they made a fatal mistake: they bought Time Warner for a record-breaking
$164 billion. It was the most ambitious merger of its time,
but it was doomed from the start. The goal was to create a tech-media hybrid,
but the technology to virtualize all of Time Warner’s content just wasn’t there yet. Their corporate cultures were totally different
and couldn’t mix, leaving the new organization in complete chaos. The end result was a $99 billion loss made
just two years later, at which point AOL Time Warner shamefully dropped AOL from its name. By that point AOL was getting desperate. Their dial up service was losing ground to
cheaper and faster broadband providers, and they couldn’t stop bleeding subscribers,
even after making cancellation an exceedingly long and painful process. Eventually they stopped trying to sign people
up altogether, and they focused entirely on milking their shrinking audience through advertising. By 2007 AOL was down to 9 million subscribers
and had fired 40% of its workforce. They shut down their online services one by
one until they were spun off from Time Warner in 2009 with only 5 million subs remaining. Advertising was AOL’s only way forward,
and so they went with it. They acquired a bunch of content sites, most
notably TechCrunch in 2010 and the Huffington Post in 2011. They didn’t stop bleeding money until 2013,
when their dial-up subscriber count stabilized at just over 2 million. In the end, AOL got swallowed up by Verizon,
who bought them for $4.4 billion in 2015. Another Internet remnant Verizon are eager
to buy is Yahoo, who they intend to merge with AOL into some sort of Frankenstein advertising
monstrosity. Whatever the case, at least-
Thanks for watching and thank you to everyone who’s supporting us on Patreon. If you liked the video head on over to our
subreddit and tell us why. Or, if Reddit isn’t really your thing, you
can also talk to us on Facebook or Twitter. If you haven’t watched it you should check
out our previous video on the history of Adidas, from their time making bazookas for Hitler
to their global footwear dominance. You should also check out the full Behind
the Business playlist, where you’ll find the interesting stories of other big companies. Once again, thanks a lot for watching, and
as always: stay smart.

Danny Hutson

100 thoughts on “AOL: The Rise and Fall of the First Internet Empire

  1. A friend of mine always said he would burn his computer to a charred black mass before he would install AOL. He felt getting AOL on your computer was like getting a tattoo when drunk; sounds great at the time; but later, you can't get easily get rid of it.

  2. I liked AOL back then. Used them for some years. But once I got cable there was no use for them anymore and they dumped Usenet access too, big mistake.

  3. Met my first wife in an AOL chat room in 2000. Married for 14 years, Had two wonderful daughters. I wonder who would cease to be if it wasn’t for the AOL chat rooms.

  4. Broadband service killed AOL. You didn’t need as separate ISP anymore that didn’t own in the internet pipeline

  5. That is the most annoying and distracting background music ever. Doesn't seem to fit the video at all.

  6. the reason AOL fell was because after Al Gore invented the internet he quit AOL and invented global warming.  if only Al would have stayed at AOL…damn you Al.

  7. As a teenager back in the mid 90s, I was able to get free AOL by using fake credit card numbers. My friend's brother showed me that if I started with 4 specific numbers, the rest of the numbers could be typed randomly and it would go through as a valid credit card. It would take around 3 days before AOL would realize it wasn't a real card and they would cancel the account. Then I would just do it again and again. Finally, in late 1996 the trick stopped working altogether.

  8. For a lot of people that started using the Internet 25 – 30 years ago would definitely tell you that AOL, Prodigy, and/or CompuServe were where a lot of people got their start in terms of surfing.

  9. I remember those disks. I use to delete aol right before the subscription ends and register again under new info. Free internet for years

  10. At 6:06 that sound STILL makes the hair on my neck bristle. I was astonished at how that simple sound is so embedded with the sense of discontent and even a kind of dread I'd get when I heard it….also that sense of impending something's about to happen that the little dial up connection and the icons with it culminating with "you've got mail!" which was pretty exciting back when you were a young person. Like getting a toy in the mail 6 weeks after you ordered it, wrapped in a brown box or envelope with YOUR OWN NAME on it, like a real person! (I think too of Steve Martin in "The Jerk" getting so excited over his name in the phone book)

  11. What wasn't mentioned was the cute accounting nonsense AOL was doing with those CDs. AOL was calling those CDs inventory, (as in an asset). Those CDs were actually an expense, as in advertising or promotional expense. If those CDs were accounted for correctly, AOL would have looked a lot less solvent. Scam from the get go. I knew this at the time and when AOL bought Time Warner, my reaction was …. It shoulda been the other way around. Good riddance.

  12. I was a member of aol back in 92 It was $9.95 a month You got five free hours for that 995 after that it was $2.95 every single hour you were on line I used to get bills for 2- $3000 a month

  13. The Blue Screen of Death. The only use of Internet Explorer was to download Netscape, think Opera browser now, a neat, clean, easy to use browser. Then AOL bought Netscape and Netscape began to choke to death on bloatware. I never liked AOL, I preferred local providers that actually had a customer service. I use Firefox mostly now, but it is beginning to get grouchy, Internet Explorer is just not usable.

  14. Commodore 64 was THE most popular computer of its time (until 1988 when IBM PC clones outsold it)


  15. AOL Compuserve Prodigy were dialup companies. When dialup became obsolete so too did those companies


  16. Very Cool !! Lived it 100% . . . Working Telecom on Nortel PBX/DCOs . and a rabid AOL user . . . 🙂
    and then there was You Tube !!

  17. I remember these days, I grabbed a copy of aol hanging up on a clip in a checkout line in the garden center Walmart.

    Activated my free month, set a date on the calendar one day before expiration to call, cancel and didn’t pay for AOL for the next three years (100% true) I would call threaten to cancel and they would give me 3 months free, so I set the date, rinse and repeat. ? ahh the good ole days!

  18. I was at the top of the food chain in an AOL cancellation department for 2003. I made $50,000 that year duping people into keep their AOL accounts. Ask me anything.

  19. To think, I still own the original AOL as well as CompuServe floppy disks. I also still have Procomm Plus which let my old PC dial out to BBS's. That's back when computers weren't fast by today's standards, but actually a higher quality PC.

  20. i would download my mp3s from an irc chat room . using either MIRC or POLORIS script. i would play age of empires on microsoft zone

  21. Atari ?? I remember my brother having this for Xmas..pacman ? all his mates would come play it also lol ✌️

  22. I worked for AOL when they merged with TW. It was a big thing, lots of celebrations, etc. what was especially funny, and painful for those fully vested, was watching the stock price decreased while Case and TW’s CEO were prattling on about the merger.

  23. Who remembers A/S/L??!! So much fun in those chat rooms.. It wasnt bout how ppl looked bc everyone started talkin to each other without knowing how they looked at first.

  24. The decline and downfall of AOL as an ISP began in 1999. It was at least partially due to one of AOL's technical support partners. I was an outsourced contract support representative for AOL at the time. We were making a TON of money for our company (located in Texas), and were doing so well that our company's management decided we needed a new call center…1200 miles away (Georgia) And management wouldn't pay our relocation expenses. Not surprisingly, most of the team didn't move. Also not surprisingly, within a year the new call center folded and AOL decided it was better to take their technical support overseas….

  25. I still use AOL, now Broadband… Was on their Dial-up until 2015! I have been a customer for almost 20 years. Still works for me. One reason I kept the Dial-up so long is because it was so cheap! The E-mail is fine and has a really strong Spam filter!

  26. I met a lot of girls from aol nyc chat rooms..97-98…I’m like 13-14 lol…I’m talking early on in the AOL days…when not that many ppl had a picture to send to begin with…so there were a lot of chances taken lol…but I met a lot of cuties believe it lol the good ole days


  28. It surprised me at first that many people think that kids born in the early 2000s don't understand these technologies
    But then again I might be the odd one out.
    I remember a little bit of AOL back when my parents used in it in the mid to late 2000's
    We still used cassettes
    and CDs
    and had ethernet
    and had CRT TVs
    and VHS tapes
    and watched YouTube on 240p-480p

    But there are three things that I had no idea of or didn't understand:
    How wacky the 90s internet looked like (only knew about the early 2000s webpages)
    beepers (never had one and was a little confusing at first)
    fax (I get it now but it confused tf out of me back then)

    and 1970s-2000s music was a large part of my childhood thanks to my parents.

    so yes, we gen Z can understand these relics of the past
    …then again a few kids my age don't know how to read a clock face nor understand texting on flip phones :/

  29. Compuserve was around before AOL. It wasn't uncommon for offices to have it, because software upgrades could be downloaded through it rather than waiting weeks for a diskette to be mailed to you.

  30. I've been trying to cancel AOL for 18 years. Apparently the customer service phone is on the floor in an otherwise empty room that nobody every goes in.

  31. I kinda miss dial up. Miss the bleeps n bloops n scratches n whoooshes. Was kinda cozy. Simpler times

  32. Never had a home computer or laptop.never had a vcr dvd or premium cable…got a flip phone in 2001…first smartphone 2014…..

  33. Wow ! This video brought back some fond memories… I was a good customer for many months. As my skill level increased I began to find AOL restrictive. Remember how they would disconnect you for inactivity ? Well I found a way to stay on for days without being kicked off!

    Bearshare, Napster were fantastic. Some of the chat rooms were great, met some nice people there. After a while I quit talking to people that I did not personally know through IM (Instant Message?) You could run into some unstable people at times…

  34. Does anyone remember Net Zero? Is it even still around? I remember in the late 90’s when my father got it because it literally was free back then, and then we upgraded to “AT&T Digital Cable” before it was split rebranded as “Comcast” in the early 2000’s.

    Crazy how time flies.


  36. AOL in the 90's was the best and worst of the internet. The busy signals of 96/97, the constant lag, and slow dial-up were really annoying but the chat rooms and games were cool. I spent way more time playing slingo and trolling on the people connection/chat channel than I care to admit.

  37. Everytime I see an AOL logo, I remember that long Dial tone with the annoying beep
    While begging the household not to use the phone.

  38. Fuck you AOL, You Fucked up ICQ, Yahoo and who knows what else.
    Any AOL software on a pc always fucked up.


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