in 1997, the explosion of the world wide web was changing the nature of human interaction as we knew it. and america online was at the forefront. with over half of the entire internet-connected population of the us
apple stock price wsj, using aol to get online, the monolithic service seemed unstoppable. but other than the occasional story about howthey still have a bizarre number of customers paying out the nose for dial-up these days,
you don't hear much about aol anymore. and seeing as they once formed the largestmedia company in the world with time warner, we're left with the question: what happened? this is lgr tech tales, where we take a look at noteworthy stories of technological inspiration, failure, and everything in between. this episode tells the tale of the dial-upservice turned multimedia empire,
america online. the story of aol picks up in 1988. quantum computer services had beenrunning their own dial-up online service called quantum link. this was a highly ambitious, but onlymoderately successful subscription, that was sold to commodore 64 users, funded directly by commodore themselves. but quantum needed more than moderate success, and their exclusive deal withcommodore just wasn't cutting it.
that's because before quantum link, their only product was a cartridge for the atari 2600 called the gameline in 1982, which let users dial into a server anddownload games through their console. but it was a huge flop, and cost investors millions of dollars, selling only a small percentage of total units produced. investors ousted those theydeemed responsible at the company, like the co-founder, bill von meister,
and quantum link was createdfor the commodore 64 as a result, using similar ideas of online connectivity. but the user base for that systemwas decreasing all the time, and quantum's cash reserve was dwindling fast and their debts were piling up. coincidentally, apple computerwas also having cash flow problems with their own online service called applelink. general electric's information services, or geis, provided the server andsoftware backend for applelink.
but since it was so expensive, it wasonly available to company employees and select apple business partners. it wasn't a public service. their head of support, john ebbs, saw the potential for decreasing costs and increasing the effectiveness of customer support through an online service available to the public. and there was talk of reconfiguringapplelink for this purpose, while also providing onlineservices similar to quantum link.
but it was just downright too expensive to pursue, costing $30 million a year to maintain as it was. this led apple to pursue other options, and it led them to steve case, vice president over at quantum, who had been spearheadingmuch of the company's direction since introducing quantum link. they reached an agreement to createa home computer version of applelink, based on the protocols provided by quantum link.
while also borrowing from a graphicaluser interface developed by general electric called business talk. while all of this seemed promising, apple proved to be hard toget along with from the start. not only did they drag out developmenttime by demanding constant changes to make it fit apple's strict design language, but they refused quantum's suggestions tobundle the software with new computers. apple also enforced a particular set of limitationson how quantum could advertise the product, an approach that turned out to be costly
and not as effective as what quantumthought they could do in-house. eventually, the final result wasapplelink: personal edition, released in may of 1988 at the san francisco applefest. the users that actually bought itwere impressed with it. but due to the lackluster marketing and the factthat apple was arguably overcharging for it, at up to $15 an hour to use, applelink: personal editionwas already being called a flop. and the existence of tandy pc-link
only added insult to injury from apple's point of view. this was a very similar service quantum hadmade for radio shack during the same time for tandy computers and ibm pc compatibles. apple blamed quantum for not working hard enough. and in turn, the board of directorsat quantum blamed steve case. they wanted him gone. however, quantum ceo jim kimseywas not having any of it. behind the scenes, he had been prepping steve caseto take over for him as the head of the company, and he argued that wasting that$5 million they'd spent on applelink,
and in turn, steve case's education, would be a huge mistake. the argument worked. case's job was saved, and they proceeded to set thestage for the future in 1989 by working with their chieftechnology officer, mark seriff, to revisit applelink and tweak it intosomething that was less associated with apple. they called it "america online,"
a name meant to imply a larger, morenationwide service for every american. there was some debate aboutthe abbreviation, on the other hand. calling it "a.o.," as seen in their logo, brought up comparisons to "b.o." and since no one wanted tobe associated with body odor, an "l" was added to the end, to become "aol." that was probably for the best. aol was still a self-contained service.
an online walled garden of curated content. but there was plenty to do,like instant messaging, chat rooms, and online gaming with fellow aol users. the other big draw of america online was their channel and keyword system, both of which were proudly displayed in advertising. before the days of widespreadaudio-visually impressive websites, visiting a channel on aol was a treat for the senses, many of which was unique with completebranding for whatever their product was.
and typing in simple keywordsmade it easy to find these channels without having to type in a long address. the program also supported sound and aol 1.0 was the first timepeople heard this when signing on: aol voice:"welcome!" "you've got mail!" lgr:ahh, that friendly voice alonemade getting online worthwhile. it also had a game calledquantum space that users could play, which was the first fully automatedplay-by-email video game,
developed by stormfront studios. and after convincing steve caseit was technically feasible, stormfront made another gameexclusively for aol subscribers in 1991: neverwinter nights, co-developed with tsr and ssi, using their gold box enginefor dungeons & dragons games. it was the first massivelymultiplayer online role-playing game to feature graphics, not just text, and allowed up to 50 playersto play together in each server.
neverwinter nights paired nicely with thefirst version of aol for ms-dos pcs in 1991, which is a platform that had quite a large user base, with ssi's existing gold box role-playing games. by 1992, they had over 150,000 subscribers for america online. and along with the introduction ofthe first version of aol for windows, they decided to take the company public raising $66 million in the process. shortly after this, steve casewas made the ceo of the company,
now named america online incorporated, with jim kimsey taking theseat of chairman the company. oddly enough, this was the secondtime case had been named ceo, since it happened briefly back in 1991. but he was soon stripped of the title after the board decided he looked too young for a companyabout to go public on the stock market. but now that they had tonsof cash, case was reinstated, and quickly got to work on the next big thing for aol. and that thing...
was a ludicrous number of floppy disks! you see, aol had a steady cash flow, but they needed new users if they ever hoped to surpass the likes of competing services like prodigy and compuserve. enter jan brandt, aol's head of marketing, starting in april of 1993. the success of the latest releaseof the children's book "corduroy"
was the result of her work at newfield publications, where under her direction they had sent outfree copies of the book to prospective customers. it had worked brilliantly and theymade back their money in no time, because people just needed to be made aware of it. so why not try it with america online? up to that point, online serviceproviders sold the software in stores and perhaps bundled it with a new computer purchase. but giving it away completely for free, that was ballsy.
steve case was hesitant at first, but ended up giving brandt a budgetof around a quarter-million dollars to try out the idea. and it's less than it sounds like, too, since the cost of producingeach floppy disk alone was $1.09, and they still had packagingand postage costs after that. they figured one percent of users trying out the disk from this campaign would be a good result. but when nearly ten percent signed upas soon as they got the disk in hand,
aol knew they'd struck gold. before long, aol floppy disks and cd-romswere showing up absolutely everywhere. mailboxes, magazines, bookstores, blockbusters, and even in packages of frozen omaha steaks. and, yes, the disks survived being frozen just fine. at their peak, half of all cds producedworldwide were for america online alone. this disc marketing campaign was so successful, that soon multiple suitors were lined up, ready to partner with aol,
including microsoft's bill gates, who invited steve case and jim kimseyout to redmond to meet with him. there was talk of a partnership,and even a few murmurs of an acquisition, but case was adamantly against the idea. the meeting went so badly thatafterward, gates said to an associate: and so gates and his team began workingon what would become internet explorer and the microsoft network instead. and that is a tale for another day. whatever, this was fine by the folks at aol
because things were really taking off. in 1993, they introduced several new features: personal "@aol.com" emailaddresses for every aol subscriber, access to the vast usenetdistributed discussion system, and an exciting new network, the world wide web. yes, the internet was finally available on aol. browsers like ncsa mosaicand later netscape navigator were making internet usage easier all the time, so it only made sense for aolto include their own access.
by 1994, they had discontinuedq-link and pc-link entirely to focus on america online exclusively. and combined with the introduction ofinternet advertising within aol services, making them tons of cash, it was clear that the web was the future. aol.com debuted in 1995, acting as a starting point "web directory" for net surfers everywhere– a vital thing in the days beforewidespread search engines.
1996 was also the year that,with over five million monthly subscribers, they introduced flat-rateunlimited-use subscription plans, as well as generous amounts of freehours available if you just signed up. they followed this up by adding buddy lists so users could easily find each other, and the iconic running man logo, both of which led to the creation of aol instant messenger, or aim, in 1997.
and finally, they got over their differencesand reached an agreement with microsoft to bundle america online software inevery copy of windows for five years. all of this ended up making them so successful so fast, that people were signing up to the service once every six seconds. and users were constantly gettingbusy signals when signing in as a result. remember, this was all still dial-up. so if the local aol phone linewas used up, then tough luck! you had to try another one or wait it out.
but even with thousands offrustrated cancellations occurring, aol grew to over ten million users, and the money was coming infaster than they could spend it. so begins a string of murders and executions– er, mergers and acquisitions, starting by taking out their old rivals. first up was the purchase of eworld in 1997, a short-lived online service by apple,meant to be a replacement for applelink. this was followed up with the purchaseof none other than compuserve in 1998,
along with the instant messaging service icq– two of the main competitorsto america online and aim. moviefone was another big purchase, once a pioneering automated phone service, that had turned into a huge website forlooking up movie listings and information. and to top it all off, then came the netscape acquisition, which was absolutely massive at $4.2 billion. netscape navigator was thedominant browser for years,
but with microsoft's internet explorer gainingso much ground from being part of windows, they were on the verge of bankruptcy, and were forced to sell. by this point, america online seemed truly unstoppable. with tens of millions of users internationally, a value of $125 billion, and devouring so much of their competition so quickly, it was only a matter of time before they eitherbecame the biggest company in the world... or imploded in violent fashion.
but, hey! why not both? in the year 2000, aol made the announcement. they were buying time warner and the two giants would merge. in case you're not familiar,time warner was, and still is, one of the single-biggest media companies around, originally a conglomeration oftime, inc. and warner communications. teaming up with america online created thelargest media company in the world at the time,
taking on the name aol time warner. with their powers combined,it had to be a sure success, right? well... say hello to the dot-com bubble, a phenomenon that occurred when the webmarket grew to such extremes that it had to burst. and burst it did. right around the time of the aol time warner deal, with billions of dollars being lostby countless web-based businesses, leading to a major recessionin the united states and europe.
this was also during a time thatwebsites were getting more advanced, and dial-up remained just as slow. and users were starting to jump shipto broadband internet services, something that aol did not yet provide. combined with fact that the corporate culturesof aol and time warner just didn't mesh at all, and online advertising rates wererapidly falling across the board due to the bubble bursting, and the deal was doomed from the start. aol time warner's stock price was annihilated by 2002.
after reporting the biggestannual corporate loss in history, falling from $226 billion all the way down to $20 billion, the chief executive of time warner resigned, and steve case himself followed suit a year later. and as a big, rotten cherry on top, the u.s. justice department began an investigationinto america online during all of this for accounting fraud, accusing them of inflating reported ad revenue.
the suit was settled in 2004, and they paid a $510 million penalty for advertising accounting fraud. somewhat ironically, 2004 was also the year that aol acquired the website advertising.com. so that was a thing. with all the hoopla,another rebranding was long overdue. america online took on the name aol, which made sense, seeing aseveryone called them that anyway.
and with it came quite a fewchanges over the next few years. like laying off 40 percent of their workforce, and moving their corporate headquartersfrom dulles, virginia to new york city to be closer to their ad partners. they also made aol email, instant messenger,and most of their web services free to anyone with an internet connection, since their aol high speedbroadband service bundle was a bust, being discontinued in 2004. it had failed to attract customers
since aol relied on local telecomcompanies for dsl connections. and since phone and cable companiesoften bundled dsl with other services, and undercut aol, there was little incentive to payfor their services on top of that. then in 2008 came another short-sighted decision– in retrospect, at least. bebo.com. social media was becoming a big deal, with sites like friendster and myspace
setting the stage for sites like bebo. and bebo was no slouch at the time, surpassing myspace and facebookin total users in certain countries. aol time warner acquired bebo for $850 million. which seemed like a bargain compared to thevaluation of myspace at the time at $15 billion. suffice to say, the actual value of services likebebo would prove to be vastly overestimated, and bebo filed for chapter 11bankruptcy several years later. after all that, it was time to rebrand once more in 2009, this time stylizing aol
as "aol, period." not only that, but time warner split, leaving aol to do their own thingas an independent company again. and now under the directionof ex-googler tim armstrong, aol all but left behind its pastas an internet service provider, and embraced the new world of new media. they ended up acquiring severalcompanies and websites in this area, like patch media, weblogs, inc.,
techcrunch, and the huffington post, among many others. they also won the affections ofverizon communications in 2015, who decided to purchase aol outright at $50 a share, a deal worth $4.4 billion. since then, aol has continued focusing on itsadvertising and media production businesses, purchasing millennial media in 2015 and virtual reality studio riot a year later.
and in june 2016, verizon announced its intentions topurchase the core internet business of yahoo, with the plan being to merge aol and yahoo together. aw, it seems kind of appropriate, really. although there's no telling how that'll turn out. as for the company's patriarchs these days, mark seriff retired from aol in 1996, and went on to direct companies likeintellihome and u.s. online communications. and also formed the seriff foundationas a philanthropic effort.
jim kimsey retired from aol in 1995, going on to serve as chairmanof refugees international, while also working with theprivate security firm triple canopy. he unfortunately passed away on march 1, 2016, at age 76 after a battle with cancer. steve case stayed on the timewarner board of directors until 2005, when he left to spend more time workingon his investment firm, revolution, llc, and is also currently working withpoliticians to advance immigration reform with his argument being that immigration is necessary
for america's future economic success. and sadly, the fate of bill von meister is pretty tragic. after being ousted from his company in 1985, just before they introduced quantum link, bill was involved with nine morestartups over the next ten years, but he didn't stay at any of themfor more than a year or two. he died in 1995 from cancer at the age of 53, broke and in debt, with nothing much to show forall of his efforts except a plaque
at the palm restaurant in washington, d.c. and that was seemingly because he boughtmore vintage scotch there than anyone else. when steve case spoke at amemorial service for bill, he opened with: indeed, without a long stringof crazy ideas, huge failures, and total shots in the dark, america online would've never been a thing. it could have been any number of onlineservices that introduced the masses to the idea of chat rooms, online gaming,
cybersex, forwards from grandma, and free frisbees and drink coasters. but for millions around the world, it was aol that accomplished all of this and more. whether you have any nostalgia for them or not, there is no questioning the huge impact that quantum link and america online had on the world
of online communication. [music] and if you enjoyed this episode of lgr tech tales, be sure to check out the predecessor to this episode, the creation of quantum link and all the gameline stuff. it's fascinating! and as always, thank you very much for watching.
