America Online (AOL)

For millions of PC users in the 1990s, “going online” meant connecting to America Online. However, this once dominant service provider has had difficulty adapting to the changing world of the Internet.

   By the mid-1980s a growing number of PC users were starting to go online, mainly dialing up small bulletin board services. generally these were run by individuals from their homes, offering a forum for discussion and a way for users to upload and download games and other free software and shareware (see bulletin boaRd systems). However, some entrepreneurs saw the possibility of creating a commercial information service that would be interesting and useful enough that users would pay a monthly subscription fee for access. Perhaps the first such enterprise to be successful was Quantum Computer Services, founded by Jim Kimsey in 1985 and soon joined by another young entrepreneur, Steve Case. Their strategy was to team up with personal computer makers such as Commodore, Apple, and IBm to provide special online services for their users.

   In 1989 Quantum Link changed its name to America Online (AOL). In 1991 Steve Case became CEO, taking over from the retiring Kimsey. Case’s approach to marketing AOL was to aim the service at novice PC users who had trouble mastering arcane DOS (disk operating system) commands and interacting with text-based bulletin boards and primitive terminal programs. As an alternative, AOL provided a complete software package that managed the user’s connection, presented “friendly” graphics, and offered point-andclick access to features

   Chat rooms and discussion boards were also expanded and offered in a variety of formats for casual and more formal use. gaming, too, was a major emphasis of the early AOL, with some of the first online multiplayer fantasy roleplaying games such as a version of Dungeons and Dragons called Neverwinter Nights (see online games). A third popular application has been instant messaging (Im), including a feature that allowed users to set up “buddy lists” of their friends and keep track of when they were online (see also texting and instant messaging).

internet chaLLenge

By 1996 the World Wide Web was becoming popular (see WoRld Wide Web). Rather than signing up with a proprietary service such as AOL, users could simply get an account with a lower-cost direct-connection service (see inteRnetseRvice pRovideR) and then use a Web browser such as Netscape to access information and services. AOL was slow in adapting to the growing use of the Internet. At first, the service provided only limited access to the Web (and only through its proprietary software). gradually, however, AOL offered a more seamless Web experience, allowing users to run their own browsers and other software together with the proprietary interface. Also, responding to competition, AOL replaced its hourly rates with a flat monthly fee ($19.95 at first).

   Overall, AOL increasingly struggled with trying to fulfill two distinct roles: Internet access provider and content provider. By the late 1990s AOL’s monthly rates were higher than those of “no frills” access providers such as NetZero. AOL tried to compensate for this by offering integration of services (such as e-mail, chat, and instant messaging) and news and other content not available on the open Internet.

   AOL also tried to shore up its user base with aggressive marketing to users who wanted to go online but were not sure how to do so. Especially during the late 1990s, AOL was able to swell its user rolls to nearly 30 million, largely by providing millions of free CDs (such as in magazine inserts) that included a setup program and up to a month of free service. But while it was easy to get started with AOL, some users began to complain that the service would keep billing them even after they had repeatedly attempted to cancel it. meanwhile, AOL users got little respect from the 

more sophisticated inhabitants of cyberspace, who often complained that the clueless “newbies” were cluttering newsgroups and chat rooms.

   In 2000 AOL and Time Warner merged. At the time, the deal was hailed as one of the greatest mergers in corporate history, bringing together one of the foremost Internet companies with one of the biggest traditional media companies. The hope was that the new $350 billion company would be able to leverage its huge subscriber base and rich media resources to dominate the online world.

From service to content Provider

By the 2000s, however, an increasing number of people were switching from dial-up to high-speed broadband Internet access (see bRoadband) rather than subscribing to services such as AOL simply to get online. This trend and the overall decline in the Internet economy early in the decade (the “dot-bust”) contributed to a record loss of $99 billion for the combined company in 2002. In a shakeup, TimeWarner dropped “AOL” from its name, and Steve Case was replaced as executive chairman. The company increasingly began to shift its focus to providing content and services that would attract people who were already online, with revenue coming from advertising instead of subscriptions.

   In October 2006 the AOL division of Time-Warner (which by then had dropped the full name America Online) announced that it would provide a new interface and software optimized for broadband users. AOL’s OpenRide desktop presents users with multiple windows for e-mail, instant messaging, Web browsing, and media (video and music), with other free services available as well. These offerings are designed to compete in a marketplace where the company faces stiff competition from other major Internet presences who have been using the advertising-based model for years (see yahoo! and google).