January 2011

Jan 11

When the internet became available to the non-technically savvy, average household, America Online was the leader in dial up service. Through the free availability of free floppy disks, and eventually CDs that provided AOL software and a few hours of free internet, AOL’s visibility in the internet marketplace was very high. In addition to the internet access, AOL provided its own dedicated browser and email provider, thus nearly monopolizing the market, at the time. In 1998, AOL acquired CompuServe and ICQ thus stamping out nearly all-additional competition in the market (Aol, 2010). By 1999, AOL’s revenue matched NBC’s and with a market value of $125 Billion, it was bigger than any other media concern in the world. The expressed goal of the company was ”To build a global medium as central to people’s lives as the telephone or television … and even more valuable” (Hansell, Now, AOL Everywhere, 1999). Basically, AOL’s goal, at the time was to be the equivalent of Microsoft to PCs—and position internet service to be just as valuable to the average American family as phone and television. With customer retention incredibly high and direct mailer marketing tactics, AOL succeeded in making the internet necessary for more and more people every year, permanently, and making themselves a world leader in internet, temporarily.

In 2000, approaching the height of the .com bubble, AOL bought Time Warner for $165 Billion dollars. Unfortunately, less than 3 years later AOL experienced its first decline in quarterly sales in its history (Hansell, As Broadband Gains, The Internet’s Snails, Like AOL, Fall Back, 2003). The decline coincided with the switch from dial-up service to much faster DSL and Cable internet services. Though AOL and its competitors (MSN, EarthLink, etc.) offered dial up services, many customers looked to their cable and phone providers because of bundled deals with phone and television service. In addition to its competition, AOL was positioned as internet for beginners, but by 2004, there were fewer and fewer “beginners,” “AOL built a huge and profitable business as a safe and easy place for people to get their first experience on the Internet. But it is now clear that the company stayed with that positioning too long after the majority of users were no longer novices” (Hansell, MEDIA; Beyond War News, AOL’s Broadband Plan May Face a Struggle, 2004). “With no frills access to the internet becoming cheaper, their bloated interface and lack of integration with stand-alone browsers left many users unhappy with the service”(Sams, 2009).

In order to shed this unsophisticated view of AOL, they recruited celebrities for their advertising campaigns in an effort to look relevant which, to many, appeared desperate. They began shifting towards content as its unique valuable service. “The AOL brand is associated with Internet novices, protective parents and chatting teens. It is not clear that the brand has what it takes to move beyond those groups to give Yahoo a run for its money (Hansell, Free or Paid? AOL Will Let Its Two Halves Duke It Out; In a Risky Reversal, An Effort to Cash In On an Online Ad Boom, 2004),” one independent internet analyst said discussing AOL’s portal service. AOL’s chat room services were a key feature in the early years of the internet to be replaced by social networking sites such as Friendster, MySpace and Facebook.

It was announced in 2007 that AOL would be moving its headquarters to New York, resulting in a layoff of 20% of its staff, known as “Bloody Tuesday,” which caused an internet backlash and a plummet of the company’s stock. While AOL did not have to reach the amount of visitors that rivals Yahoo! have they did have to work to get a readership high enough to acquire advertising revenue. Unfortunately, with the chief executives being changed and altered every few years the company lost credibility amongst its investors and when company’s such as Google retracted their investment in the company, the company’s outlooks for prosperity appeared uncertain, at best. In mid-2009, AOL parted ways with Time Warner. AOL’s shift to content had proved to e a unique feature, “Where Mr. Armstrong [CEO] will find much less competition is content, which most Internet companies find too expensive to produce. AOL already operates more than 70 specialized blogs, including Boombox (on hip-hop music), WalletPop (on personal finance) and Paw Nation (on pets)”(Hansell, Daring to Dream of a Resurgent AOL , 2009). AOL’s additional owned sites such as TMZ, MapQuest and TechCrunch, while lacking the AOL name ring in steady revenue for the company.

The biggest problem for AOL (who at the end of 2009 rebranded to Aol.) is that they were too slow to embrace change. By the time they were ready to shift their focus; others were around doing it faster, better and with better marketing tactics. AOL has consistently appeared as an old company attempting to appeal to a younger crowd while still maintaining their spokespeople as 40+ white males. Social networking sites took the place of chat rooms and instant messengers. Yahoo! cornered the content market, and with blogging being an integral part of the internet in the later years paid content made less sense, as newspapers and magazines discovered, as well. The best option for AOL now is to serve as a parent company to its more successful products such as MapQuest and TMZ and focus on making those sites the top of their respective industries. Thus, making AOL a content provider and filling a void instead of trying to take on a portion of the internet that has already been conquered.

Work Cited

Aol. (2010). Overview – AOL Corp. Retrieved December 5, 2010, fromhttp://corp.aol.com/about-aol/overview

Hansell, S. (2003, February 3). As Broadband Gains, The Internet’s Snails, Like AOL, Fall Back. Retrieved December 5, 2010, from The New York Times:http://www.nytimes.com/2003/02/03/business/as-broadband-gains-the-internet-s-snails-like-aol-fall-back.html

Hansell, S. (2009, July 22). Daring to Dream of a Resurgent AOL . Retrieved Dec 5, 2010, from The New York Times:http://www.nytimes.com/2009/07/23/technology/companies/23aol.html?_r=1

Hansell, S. (2004, November 22). Free or Paid? AOL Will Let Its Two Halves Duke It Out; In a Risky Reversal, An Effort to Cash In On an Online Ad Boom.Retrieved December 5, 2010, from The New York Times:http://select.nytimes.com/gst/abstract.html?res=F40A12FE345B0C718EDDA80994DC404482&scp=1&sq=AOL%20Will%20Let%20Its%20Two%20Halves%20Duke%20It%20Out&st=cse

Hansell, S. (2004, March 24). MEDIA; Beyond War News, AOL’s Broadband Plan May Face a Struggle. Retrieved December 5, 2010, from The New York Times: http://www.nytimes.com/2003/03/24/business/media-beyond-war-news-aol-s-broadband-plan-may-face-a-struggle.html?scp=1&sq=Welcome%20to%20the%20World%20Wide%20Wow%E2%80%A6.%20The%20AOL%20brand%20was%20perceived%20as%20not%20sophisticated%20and%20not%20necess

Hansell, S. (1999, July 4). Now, AOL Everywhere. Retrieved December 5, 2010, from New York Times: http://select.nytimes.com/gst/abstract.html?res=F00F17FA39590C778CDDAE0894D1494D81&scp=1&sq=Now,%20AOL%20Everywhere&st=cse

Sams, B. (2009, Nov 30). AOL debuts new logo. Retrieved Dec 5, 2010, from Neowin: http://www.neowin.net/news/aol-debuts-new-logo

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