AOL's Journey: From Dial-Up To A New Brand

The once-ubiquitous AOL CDs. i i

hide captionAOL's CDs were once ubiquitous, but DSL and cable modems made the company's dial-up service a dinosaur. Now, AOL is struggling for relevance and revenue, as it plots its resurrection story.

Courtesy of AOL
The once-ubiquitous AOL CDs.

AOL's CDs were once ubiquitous, but DSL and cable modems made the company's dial-up service a dinosaur. Now, AOL is struggling for relevance and revenue, as it plots its resurrection story.

Courtesy of AOL

The company that once defined the Internet turns 25 on Monday.

AOL started out in 1985 as a software company and eventually became the biggest name on the Web, signing up tens of millions of people for its dial-up Internet connection and popular e-mail service.

But today, it's struggling for relevance and revenue. There was a time, though, when AOL was all most Americans knew of the Internet.

Memories Of A Dial-Up Modem

Comedian Loni Love tries to replicate the screeching sound of a dial-up modem.

"When we heard that little dial-up sound, that eeeeee, and then you connected, and you then go and you check your mail and you get that 'you got mail,' you were excited," Love says. "I mean, that was the thing."

Love is known for her ability to find the humor in pop culture, on shows such as VH1's I Love the '80s and more recently in her own Comedy Central special.

"We were just amazed at it," Love says. "But [back] then, we didn't realize how slow it was. I mean just the dial-up alone was slow.

"And if you had a picture that you want to send your friends, it would take like two hours. I mean, you could go over to their house, see the picture and come back, and it was still downloading."

A Failed Merger

Slow or not, AOL was a phenomenon. In December 1999, the company was worth $222 billion. In 2001, AOL merged with Time Warner, a deal in which AOL was in the driver's seat. It is now seen as one of the worst mergers in the history of business.

Soon, DSL and cable modems hit the scene in a big way, making dial-up AOL a dinosaur.

Here are some key dates in the history of AOL:

1985: AOL is born (then called Quantum Computer Services)

1989: Members hear "Welcome! You've got mail!" for the first time

1989: Instant Messenger launches

1991: Quantum is renamed America Online, Inc.

1992: AOL goes public on NASDAQ (symbol AMER)

1993: Disk mailings make AOL a household name

1998: The movie You've Got Mail with Tom Hanks and Meg Ryan is released

2001: AOL and Time Warner merge

2006: AOL begins offering its e-mail, software, content and most of its services free to Web users

2009: AOL begins trading on the NYSE after separating from Time Warner

Source: AOL

Today, AOL still has about 5 million dial-up subscribers, and those subscriptions represent a big share of the company's revenues. But it's losing subscribers fast, at a rate of 3 percent a month. To state the obvious, AOL needs a new business model.

And it has one, says Alex Gounares, the company's new chief technology officer.

"What AOL has become today is much broader than the dial-up business," Gounares says. "I mean, we're a great content business. There's over 160 different content sites, from Engadget to Daily Finance to World of Warcraft Insider [a video game fan site]."

Reinventing Itself

A shadow of its former self, AOL separated from Time Warner last year with a market value of $3 billion. The company went from 19,000 employees at its peak to about 5,000 now. Several of them are Pulitzer Prize-winning journalists and well-known sports columnists who were hired recently.

The goal, say company executives, is to combine content, technology and advertising in a way that redefines the Internet.

"We're 25, so we're roughly just getting out of college," says company CEO Tim Armstrong, who has worked for Google.

He says he's working to reshape AOL as the world's largest start-up.

"We have our future career to go at AOL, and that's what we're focused on," Armstrong says.

But while the company focuses on its future, its present is rocky.

AOL's first-quarter earnings report showed revenues down 23 percent from the year before.

"I think they have very strong leadership with a focused plan, and that's half the battle," says Clayton Moran, an analyst at The Benchmark Co. "But there's no signs in their financial or operating results that indicate this company is turning itself around yet."

And then there's the issue of brand perception. There are a whole lot of people who still think of AOL as the dial-up company.

"Now AOL is the grandma of online Web services," says comedian Love. "I mean, we don't need it anymore. It's 25 years old. It needs some Botox or something because it's old."

To hear AOL CEO Armstrong tell it, this isn't a problem; it's an opportunity. Folks at AOL point to Apple as an example. It was an early leader, then declared a dead brand, and now Apple rules.

AOL is hoping for its own resurrection story.

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