Spoutin' Off: Good night and good luck, AOL
By Michael E. Rau
August 7, 2006
So long, AOL - and don't let the door hit you on the way out.
Having said that, I guess it's not hard to deduce that I'm no fan of the media monolith. Accordingly, their apparent journey down the road to the annals of technology oblivion affects me not at all. But knowing how many of you - at one time or another - either are or were employers of their services, I feel I should at least ponder their fortunes.
It's not that AOL's products or services are bad - in contrast to many of my less-than-favorite tech companies - it's just that I've always considered them to represent a phenomenally poor value in the scheme of things.
In 1992, when I first started tapping into the Internet from home, commercial services were basically bulletin board systems (BBSs). The 'big' four of these were CompuServe, America Online (AOL), Prodigy, and GEnie (owned by General Electric).
My service of choice at the time was GEnie, and I had no complaints. All four had their own pluses and minuses in terms of tools and services, but essentially, they provided the means for relatively easy connectivity to the Internet.
Without going into a dissertation on the evolution of the Internet and coming-of-age of the World Wide Web, the Mosaic browser changed everything. This was the application which took HTML code and rendered it into a visually-rich online page.
Mosaic became the basis for Netscape (and also eventually Internet Explorer). The Netscape browser, in turn, rendered the online toolkits provided by the services mentioned above obsolete. Once the World Wide Web came online and developers started writing their Web pages in HTML, all you needed was your browser and a modem-enabled pipeline to the Internet.
GEnie gave up almost immediately - CompuServe lasted until 1998, when it was bought by AOL - Prodigy lasted until 2001, when it was bought by SBC Communications and the brand name was retired.
So what was different about AOL? Two things - strategic foresight and marketing.
First, they immediately grasped the significance of HTML and Web browsers. They licensed Netscape, and then built a unique proprietary interface on top of it (I always thought of this as the "Internet for Dummies" front page).
Granted, it made some online activities marginally simpler to engage in, but not much.
No - what made AOL succeed was one of the best executed marketing plans in history. I think of it as the "AOL Model".
From the mid-90s to the present, there was hardly nowhere you could go where you wouldn't find, nor any computer product you could buy which did not include, a CD from AOL promoting their services. They also distributed their CDs through the mail and through some newspapers. You could even pick them up in store checkout lines (I ended up with around 30 over the years).
The AOL sign-up CD always included an offer of a couple of months of service for free upfront and frankly, made connecting to the World Wide Web for the first time a relatively easy experience.
But after the trial period, if you stayed with the service, it was pretty much the most expensive way for you as an individual to connect to the Internet.
When AOL was charging $20 per month, the service I was using cost $7.45 and the only thing different was the "Internet for Dummies" front page. When they went up to $25 per month, I was still paying the same thing.
I knew lots of people who used AOL, and most used it for browsing and email and didn't use any of AOL's proprietary features, but stayed with the service anyway.
I've been on a broadband connection for a long time now, and thus pay a lot more. Companies like AOL which don't own or control broadband infrastructure can only offer such service through a third party, which detracts hugely from profitability.
AOL still has 16.5 million subscribers, but that's no longer enough to support their business model, and they have no viable method to transition into a broadband provider, so what are they going to do?
Their news releases make it sound like they're taking the next great leap forward, but the truth is they're bowing to an evolving market which will eventually swallow them up. The 5,000 job cuts they've announced is just the first revolution of a boulder rolling downhill.
They'll still offer their dial-up service, but will seek other methods to generate revenue, such as ad-supported email and video delivery. In that arena, they'll have to go nose-to-nose with the major players like Google, Yahoo, and MSN.
It just goes to show - sooner or later, the free market catches up with all who are arrogant enough to think they're beyond competition.
Michael Rau is a mass-communications consultant in Virginia Beach. To send feedback or view past columns, visit http://dailypress.asoundidea.com.
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