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
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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.
Welcome. You've got mail. Goodbye.
AOL is dead enough now that I think I can say I used to work for them without fear of... snakes...clowns... or whatever. I wanted to share a favorite memory I think Reddit would get a kick out of (unless this gets too buried at this point).
I worked for them in Tech Support right before they reaaaally blew up. I started in 1996 when they were still charging per hour and I was there when they decided to go unlimited monthly pricing. Most folks back then, like 99% of everyone, had dial-up modems. And I'd say only about 20% of those folks had more than one phone line to their house. So it was rare that people could be online and talking to me at the same time.
One guy called up for a problem for me to fix. He was using some of those "free hours" disks that everyone got in the mail. After I fixed his problem, he asked me what else was good about America Online and what things should he check out that would be worth it to keep using it after his time was up. This guy sounded like he was in his early 20's. It is important to remember that most of the world had never heard of the Internet yet. I will post a near verbatim conversation of what happened next.
Me: "Well, AOL is a 'walled garden.' Everything within AOL is scanned for viruses. All of the content is regulated so you know you're safe. Unlike the actual Internet you won't find porn on..."
Him with complete and honest shock: "THERE'S PORN!?!?!"
Me: "Yes, if you were to leave AOL and go to the Internet..."
Him frantic: "Wha..? How...? What do I do?!"
Me: "If you click on the Internet Explorer icon, the big blue E...."
Him: "Hold on..! Click what?! How do I do this?! Where do I go to see it!??!?!"
Me: "If you go to Internet Explorer and search I am sure you can find some."
Him: "But...! Where...?! How do I get to it?! Where do I go?! Tell me pleeease!!!" (His desperation was real. I am 100% convinced he was not pulling my leg.)
Me not wanting to give out an actual URL while calls are recorded: "If you go to Altavista.com and do a search of what you're looking for, I'm sure you'll find it."
Him unsure if he had enough information and afraid to let me go for fear that his knowledge was not enough and the information would be lost forever once I hung up: "Is that it? Are you sure?! Please help!"
Me: "I am sure if you go to Internet Explorer and type in altavista.com, or 'keyword altavista.com' and then put in your search, you will find what you are looking for."
Him feeling a little more assured: "Ok. Thank you!!!!!"
I like to think that I made an actual and honest difference in that person's life that day. He may have gotten fired after not showing up to work for two weeks straight, but I at least let some happiness into his life.
My mom once tried to cancel our AOL subscription after being a loyal member for 7 years, because our computer had broken and she didn't have money for a new one. AOL actually contacted her and offered to buy her a new computer if she would continue her subscription. She agreed and still has that computer today.
When i was like 10 years old, I had AOL dial up and I was bored, so I went in one of those chat rooms for kids. Some dude was spamming the chat so i said "shut up". Within 5 seconds, I was not only booted out of the chatroom, but AOL itself. I then kept trying to log back but these fuckers were locking me out of my own fucking internet that I (my mom) was paying for, just for saying "shut up". To make matters worse, when my mom called AOL they claimed that I said "a bad word". Fuckers.
A/S/L?
Will always remember how cool AOL was in the beginning. Came from Prodigy, and all of my friends had AOL. We'd make plans at school to meet up in a secret chat room that night and spent so many hours just chatting.
Met my wife of 11 years in an AOL chatroom. Met her in Oct of 1998. Talked until Dec of 98, then met her physically, moved in with her March of 1999. Married her March 5th 2005 and the rest is history. Been with her for almost 20 years. So thanks AOL for my life. I appreciate it.
IMO I think LGR does it better. I like details and that's what he gave me. link
I think I have several hundred AOL disks still lying about.