The Rise And Fall Of AOL

The Rise And Fall Of AOL

Welcome. You’ve got mail! I do recognize that. That’s all AOL. If you’re familiar with my sounds, there’s a
good chance that you were one of AOL’s over 20 million subscribers who used
its dial up internet and AIM messaging system. What was your AOL user name? Bsquad. Bsquad? My AIM screen names
were bugsthatboy and traineeboyC. I recall my AOL name being mockalot. AOL was considered by many to have been the
king of media in the 90s and early 2000s. At the time, the company
was so prevalent in U.S. culture that it was a major plot point
in the 1998 romantic comedy, “You’ve Got Mail,” featuring Tom Hanks and Meg Ryan. I turn on my computer. I go online. Welcome. And my breath catches in my
chest until I hear three little words: You’ve got mail! At its peak in December 1999, AOL
had a market capitalization of $222 billion. But the influx of broadband internet and
the burst of the dot-com bubble reduced the one time internet behemoth to
a shadow of its former self. For me, watching AOL over the last 10
years, it’s been it’s been hard because in the 90s it really was the dominant
company helped define the internet for so many people, helped bring so many
people online for the first time. But it’s been a struggle. AOL was born in 1983, not as an
internet service provider, but as a video game business. At the time, the company was
called Control Video Corporation and it allowed gamers to hook up their Atari 2600
game console to their phone line to download video games. The business was not very successful and
was reborn shortly after as Quantum Computer Services. The company’s software gave customers access
to instant messaging, games, news, online shopping and email. It wasn’t until 1991 that America Online,
as AOL was formally known, came into existence with the goal of opening up
the internet for all users, not just academics. So when we got started and launched
AOL, very few people were online. Even then, personal computers didn’t
even have modems inside. Most of the PC manufacturers didn’t
think people wanted to be online. And the servers at the time
were very hard to use. They required kind of
real technology expertise. So the real focus
for AOL was simplicity. How do you create an easy-to-use,
graphical interface that anybody could use? Under the leadership of CEO Steve Case,
America Online went public in 1992 at $11.50/share. Beginning in 1993, AOL began an aggressive
campaign to sign up new users by mailing floppy disks and later CDs containing
the company’s software and a few hours of free service
to prospective customers. When I think of AOL, I think of those
metal, tin cases that they would send to me probably like twice a week in the mail
trying to get me to sign up for AOL. I probably had a hundred of them. They would just come every month. The campaign worked. And by 2000, AOL subscribers had ballooned from
less than 200,000 in 1992 to 25 million. That same year, AOL announced that
it would be getting even bigger. We’re pleased to have all of you here with
us today as we announce the merger to create the first global media and
communications company of the internet century, AOL Time Warner. AOL’s acquisition of Time Warner cost over
$160 billion, making it one of the largest mergers in history. At the time, it seemed
like a really good idea. From AOL’s perspective, we knew we
needed a path to broadband. Time Warner was the largest operator of cable
systems and also had a lot of brands, CNN and HBO and so forth, that
we thought would be valuable in a broadband world. From the Time Warner perspective, there
were very strong media businesses but didn’t really have a clear
path to a digital future. And so the combination of those two
companies we really thought was a winning combination. But things didn’t turn out as planned. From the very beginning, the merged company
failed to live up to its lofty financial expectations. To make matters worse, technology stocks that
had been thriving in the 90s suddenly fell off a cliff with
the burst of the internet bubble. At the time, AOL’s business consisted
of dial-up internet and ad revenue. When the air went out of the dot-com
bubble in 1999 or 2000, all of these companies that were paying AOL money all
went bankrupt or dwindled to the point where they could no longer
pay AOL that money. So their advertising revenue, which was in
the billions of dollars, dried up really quickly. And so that was sort of
phase one of AOL’s decline. Phase two was on the distribution side. It didn’t take long after that AOL
Time Warner merger for people to start transitioning over to cable broadband. AOL Time Warner reported losses of $98 billion
for the 2002 year, making it the largest annual net loss in U.S. corporate history. The new economic pressures in the
technology industry also caused a rift between AOL and Time Warner employees. But there were a lot of people at
Time Warner that weren’t as enthusiastic about the digital path, weren’t as enthusiastic
about the internet, were worried how it might cannibalize some of their businesses,
so they tended to play defense. The culture clash in some ways represented
a lot of what sort of so-called traditional media and so-called
internet or digital media. So at AOL, and this is paraphrasing
from Facebook, you know, move fast, break things. That was anathema to the Time
Warner side, which, you know, if you think about Time Inc., they weren’t in the
business of breaking things. They were in the business of being
a standard bearer for certain kinds of journalism and activities. Because the bubble burst on the internet,
there became a lot of skepticism around what AOL’s business model was
and what their thinking was. And Time Warner, which had bounced along
for decades as a sturdier company, they now looked at their buyer
and said, we can’t trust you. This doesn’t work anymore. You guys actually have to trust us. But Jeff Bewkes, who was chairman
of Time Warner’s Entertainment and Networks Group at the time, says AOL’s problems
stemmed from a lack of foresight into the changing internet technology,
not a culture clash. I don’t agree that a significant
part of the challenges AOL faced had to do with the Time Warner company. Think of the 90s, and you plug
your telephone modem into the narrowband modem and you’re connected for five hours
in your house to the AOL server. There’s no charge. There’s no permission or deal that you have
to do as AOL with the local telephone company. That was a unique time and situation. And as the internet then developed in
the first decade of the 21st century, that began to compete and people
wanted to go using broadband. Which meant you had to then make a
deal with the broadband provider if you were an AOL or if you
were using their bandwidth. Besides business troubles, AOL also
had run-ins with the law. We are here to announce significant
developments in the continuing corporate fraud investigation involving America Online, the
internet company which is a wholly owned subsidiary of
Time Warner Inc. In a criminal complaint that was filed
today in the Eastern District of Virginia, the government has charged AOL
with aiding and abetting securities fraud. And by 2006, AOL was really
struggling to keep up with competitors. With 113 million regular visitors, AOL
commands the second biggest audience on the web after Yahoo. But AOL’s roughly 18 million paying
subscribers are fleeing, dropping their slow dial-up accounts for speedier
broadband internet connections and getting email, messaging, and other services for
free from competitors like Google and MSN. Leading AOL at the time was Jon Miller,
who says the company could have gone in a completely different direction had it
had the support of the increasingly influential Time Warner. We had a line on
buying YouTube before anybody else. We had an opportunity to step
in with Facebook when Yahoo stumbled. We had a chance maybe to step into Tencent,
which is the parent of QQ in those days and WeChat today, a
major company in Asia. And in all those turns, we just
didn’t get the support to do that. In 2009, Time Warner spun off
AOL as a separate company again. At the time, AOL’s market
capitalization had fallen to $3.44 billion. That same year, AOL hired Tim
Armstrong, a former Google executive, as the company’s new CEO. After taking over AOL and spinning out
of Time Warner, it became really clear that there were a set of things that we
had to get done to fix the company. Number one was the culture. And I think having gone from zero to
$150 billion dollar company at Google into AOL that went from $150 billion down
to $1 billion, the culture really needed repairing. I think the employee base needed
one thing, which was belief in the strategy and belief in
where we’re going. Number two was to set a clear strategy
and set a strategy for where the industry was going, not
where it had been. So that was about video. It was about building content brands. It was about programmatic advertising. And it was really about using data as the
oil in the new economy to help AOL become a much bigger, broader player in
terms of being a personalized service for people. In 2015, Verizon announced that it
would be buying AOL for $4.4 billion. At the time period that we sold AOL
to Verizon, a few big dynamics were happening in the industry. One dynamic was that mobile was really
starting to take over and over 50 percent of our traffic was mobile. Number two was data was really important and
I used to carry around a slide to our board that had some
of these themes on it. But I used to say that data
is the oil of the new economy. And really in data what
you needed was mobile data. The third was we needed
to spend money on content. You had companies like Netflix and other
companies coming, even though we were getting into content, the content war and
race required lots of capital and we were a public company with investors that
essentially did not want to put those levels of investments to really go big in
mobile and really go big in video. So we started thinking about partnerships
and Verizon came as a natural solution to really the top three or five
issues that we saw in our future business. In 2017, Verizon also purchased Yahoo and
combined AOL and Yahoo into a division it called Oath. The main reason the Yahoo deal made sense
for Verizon was because we’re in the digital industry in the middle of the
digital economy and probably the largest change that’s ever happened
in the world. And Verizon was able to pick up a
billion users at one-time revenue between AOL and Yahoo. So even today, if you look at 2019,
the Verizon media properties that we put together at Oath are the fourth largest
set of digital properties in the United States. Like AOL Time Warner, Oath
had very high revenue projections. When we put the companies together, the
companies had roughly about $8 billion in revenue. So getting to $10 billion if you just
took the normal growth rates in the industry was an achievable goal. And I think $20 billion could have been in
sight if we had been able to plug in all the Verizon assets
and power behind it. But Oath disappointed and didn’t come close
to making $20 billion in revenue. In 2018, Verizon announced that
it was taking a $4.6 billion writedown on Oath, which basically
meant that Verizon no longer believed that the company was as
valuable as it originally expected. Shortly after, Verizon killed off the
Oath brand completely, making Yahoo and AOL part of Verizon Media. My hope and dream for AOL was always to
have AOL stay at the center of the landscape on the internet. Even though things changed a lot over time,
I think the AOL brand remains as one of the most iconic brands in this
time period of the most incredible change that’s ever happened in humanity. I think AOL will go down in history as
a company that sort of had its heyday, it passed, and then now will
ride off into the sunset. I think it’s a fact of the
business world today that brands don’t necessarily sustain. Some will and many won’t. And I think particularly as you have
a generational change that doesn’t have exposure and any emotional connection to the brand,
I don’t know that it is a sustaining brand at this point.

Danny Hutson

86 thoughts on “The Rise And Fall Of AOL

  1. ~6:30: V for Vendetta (2005) film poster and stunning, beautiful, and gorgeous Cyan Blue coloured mouse pad!

    ", a wholly owned subsidiary of…": Holy. Crap.

  2. 12:10: I have a striped polo shirt that looks so much like the shirt worn on-screen! I purchased the shirt from the Saan store located in Beauséjour, Manitoba, Canada in the summer of 2003! What a great memory! Thank you so much for this video, CNBC!

  3. The funny thing is that AOL existed in other countries, but it stood for America online.

    I guess it’s no different than American Express.

  4. I use to argue so much with my older sister because she was always on the phone and I couldnt use the internet at the same time hahaha

  5. My friend got me kicked off AOL for trolling chatrooms. They actually read the transcript to my mom when she called about why AOL wouldn't connect. I was grounded. Thanks Brent!

  6. I remember playing eddys match em all basketball on Disney and having my mom yell at me to get offline so she could call my grandmother. Ah, to be young again.

  7. I still use my AOL email. ? Of course I also have Gmail. But I went to a store recently and told the cashier my AOL email and they had no clue what I was talking about. ? I let all my junk mail go to AOL. ?

  8. Sad but true.
    AOL lost in timing.
    Someone in the AOL corporation was lazy to not advance with technology.
    SAD SAD SAD that a first world company leader at his time became a second class company for another big company in order to survive. Sad sad sad.

  9. In the next few years we will be watching videos about the rise and fall of cable. It's on it's last leg and won't live another 5 years, cable now is basically one big long unskipable YouTube ad

  10. AOL, myspace, freindster – like everything else, it all just comes and goes – same thing will happen to facebook, twitter and snapchat someday

  11. I never had aol to me they sucked from the get go overated and over price for limted services every time they sent me a stupid cd promising this and that i threw it out with out even looking at it

  12. You've got mail
    How about unexpected – GOOD BY- just as I was in the midle of doing something? Now I had to repower the computer

  13. My dad and stepmom still use AOL and I can't seem to convince them that they're paying extra for the same service since they already pay AT&T for a TV/phone/computer bundle.

  14. Love how the former executives who drove AOL into the ground blamed literally everything else but their own shortsightedness, lack of vision, inability to adapt with the constantly fast changing landscape of tech with their outdated mindsets and business strategies.

  15. A few months ago, I actually sold a few of those AOL free hour CDs on eBay. I'm not sure what you're doing to do today with 1,000+ of free hours, but if you're willing to pay $14, then please enjoy.

  16. Started using AOL in 95, I had a few screen names the last one I remember was ItsJusDan , State of the art PC , IBM Aptiva Intel 133 megahertz ,4mb ram ,2.1gb HDD , and a blazing 28,800 MWave modem. All packed with bloatware.

  17. how much will you charge me to give my channel a shout-out in your video. I only have video but I have many in the works. Thank you kind fella. Your channel is excellent.

  18. Lol my sisters would hate me every time I plug the connection off.. So I can make a phone calls on my girlfriends!?

  19. I got banned from an AOL kids chat room for spamming nonsense in the chat. Felt like the cops were going to kick in my door any minute. Now that I think of it that was probably the first time I trolled on the internet ?

  20. I miss the hissing 14.4k modem, and downloading pics, youd be in suspence when it loaded a few lines at a time. And pranking your friends by calling their phone while they were online and it kicked them off? those were good times!!

  21. Oh and when they charged by the minute for that short period of time. But you could use the free cds one after another, they didnt lock out your i.p. saying you already used one and now you need to pay. Oh! And netscape navigator cds!!

  22. Lastly, my mom has a friend in Silicon valley who, hear this, STILL has aol dialed up on a 56k via telephone on a pentium2. IN 2019!!! Wtf I had no idea this was still possible!! (She only uses it for email i guess)?

  23. Has anybody on here actually used AOL? I was born in 1987 so I don’t remember this technology. Was it good? Did it work well? Keeping in mind it was the 1990’s so obviously we cannot compared it to today. Did it work well for its time? ?

  24. Who remembers driving around to different k Marts to find those free AOL trial CDs because you ran out on a Friday. ✋

  25. Paradise Lost. A time when there was a place in the world that was only inhabited by people smart enough to enter that world.

  26. I must have been heavily distracted. I never saw an AOL CD in the mail ever? I was chilling with my plain paper fax machine thinking I was Buck Rogers.

  27. Good short documentary. I enjoyed seeing something, I knew all about in the 90's and then wondered what happened to them. This is business right? Some companies will survive some will fall by the way side.

  28. AOL failed because they were fraudulent and greedy. I recall cancelling AOL several times, but still being billed for service. I had to, at 16 years old record the call of cancellation and replay for them to successfully cancel. First fraudulent company I've dealt with.

  29. I kinda sorta remember AOL from back in the day. Part of it had to with the Tom Hanks/ Meg Ryan movie. Another was intro to computer stuff in elementary school

  30. Only white People —— never had it. It was a fad so of course white People had to have it ???I’m glad I never had AOL

  31. TIME Warner really great destroying companies, first they bought Atari and then Atari is destroyed due to Video Game crash of 1983-1984, and then they bought AOL, suddenly dot com bubble is crashing and they ditched AOL completely.

  32. If i read and understood the analytics correctly, AOL is still in the top 50 visited websites in america. 200 in the world. I dont see how its going bankrupt yet.

  33. It was ahead of the pack… and then bad management happened, just like NOKIA! If the head-honcho has no vision, i.e. like a lawyer running a business, newcomers overtake you! there are sooo many examples.

  34. Company is full of crap if you haven't got a Facebook account you can't criticize anything they say and very biased racist and one-sided political views come out of the news media now

Leave a Reply

Your email address will not be published. Required fields are marked *