AOL: The Rise and Fall of the First Internet Empire

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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
subreddit and tell us why. Or, if Reddit isn’t really your thing, you
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.

100 COMMENTS

  1. To think, I still own the original AOL as well as CompuServe floppy disks. I also still have Procomm Plus which let my old PC dial out to BBS's. That's back when computers weren't fast by today's standards, but actually a higher quality PC.

  2. i would download my mp3s from an irc chat room . using either MIRC or POLORIS script. i would play age of empires on microsoft zone

  3. Atari 🤣🤣 I remember my brother having this for Xmas..pacman 🤣 all his mates would come play it ..me also lol ✌️

  4. I worked for AOL when they merged with TW. It was a big thing, lots of celebrations, etc. what was especially funny, and painful for those fully vested, was watching the stock price decreased while Case and TW’s CEO were prattling on about the merger.

  5. Who remembers A/S/L??!! So much fun in those chat rooms.. It wasnt bout how ppl looked bc everyone started talkin to each other without knowing how they looked at first.

  6. The decline and downfall of AOL as an ISP began in 1999. It was at least partially due to one of AOL's technical support partners. I was an outsourced contract support representative for AOL at the time. We were making a TON of money for our company (located in Texas), and were doing so well that our company's management decided we needed a new call center…1200 miles away (Georgia) And management wouldn't pay our relocation expenses. Not surprisingly, most of the team didn't move. Also not surprisingly, within a year the new call center folded and AOL decided it was better to take their technical support overseas….

  7. I still use AOL, now Broadband… Was on their Dial-up until 2015! I have been a customer for almost 20 years. Still works for me. One reason I kept the Dial-up so long is because it was so cheap! The E-mail is fine and has a really strong Spam filter!

  8. I met a lot of girls from aol nyc chat rooms..97-98…I’m like 13-14 lol…I’m talking early on in the AOL days…when not that many ppl had a picture to send to begin with…so there were a lot of chances taken lol…but I met a lot of cuties believe it lol the good ole days

  9. It surprised me at first that many people think that kids born in the early 2000s don't understand these technologies
    But then again I might be the odd one out.
    I remember a little bit of AOL back when my parents used in it in the mid to late 2000's
    We still used cassettes
    and CDs
    and had ethernet
    and had CRT TVs
    and VHS tapes
    and watched YouTube on 240p-480p

    But there are three things that I had no idea of or didn't understand:
    How wacky the 90s internet looked like (only knew about the early 2000s webpages)
    beepers (never had one and was a little confusing at first)
    fax (I get it now but it confused tf out of me back then)

    and 1970s-2000s music was a large part of my childhood thanks to my parents.

    so yes, we gen Z can understand these relics of the past
    …then again a few kids my age don't know how to read a clock face nor understand texting on flip phones :/

  10. Compuserve was around before AOL. It wasn't uncommon for offices to have it, because software upgrades could be downloaded through it rather than waiting weeks for a diskette to be mailed to you.

  11. I've been trying to cancel AOL for 18 years. Apparently the customer service phone is on the floor in an otherwise empty room that nobody every goes in.

  12. Never had a home computer or laptop.never had a vcr dvd or premium cable…got a flip phone in 2001…first smartphone 2014…..

  13. Wow ! This video brought back some fond memories… I was a good customer for many months. As my skill level increased I began to find AOL restrictive. Remember how they would disconnect you for inactivity ? Well I found a way to stay on for days without being kicked off!

    Bearshare, Napster were fantastic. Some of the chat rooms were great, met some nice people there. After a while I quit talking to people that I did not personally know through IM (Instant Message?) You could run into some unstable people at times…

  14. Does anyone remember Net Zero? Is it even still around? I remember in the late 90’s when my father got it because it literally was free back then, and then we upgraded to “AT&T Digital Cable” before it was split rebranded as “Comcast” in the early 2000’s.

    Crazy how time flies.

  15. FACT….AOL SHOULD OF HAD ITS OWN….( AOL COMPUTER FOR AOL INTERNET )….ALL IN….( ONE AOL UNIT )….AND HAD IT….( EXCLUSIVE TO AOL NO OUTSIDERS )….WHERE IF YOU WANTED AOL YOU WOULD HAVE TO BUY….( AOL COMPUTER AND AOL INTERNET IN ONE AOL UNIT )….I THINK THIS WOULD HAVE SAVED AOL….EXAMPLE….( FACEBOOK MAKING A COMPUTER FOR FACEBOOK )….BUTT….( AOL IS DEAD )….ITS TIME TO MOVE ON TO….( BIGGER AND BETTER THINGS )….MAYBE IN THE FUTURE BY THE YEAR 2025 2030….( ALL INTERNET WORLD WIDE WILL BE FREE )….FOR….( ALL OF US )

  16. AOL in the 90's was the best and worst of the internet. The busy signals of 96/97, the constant lag, and slow dial-up were really annoying but the chat rooms and games were cool. I spent way more time playing slingo and trolling on the people connection/chat channel than I care to admit.

  17. Everytime I see an AOL logo, I remember that long Dial tone with the annoying beep
    While begging the household not to use the phone.

  18. Didn't hear about aol until 93. Compuserve and Prodigy had the lead. I was a Prodigy user. What elevated aol was the aggressive marketing campaign. It was aol mania. Those floppies and CDs were in magazines everywhere. Also at cashier checkouts, TV, billboards etc it generated so much users that the servers slowed down and the customer service suffered. They outgrew themselves. I eventually ditch prodigy for aol. The real nail in the coffin for the competition was the flat fee. $20 all you can eat. Prodigy and Compuserve tried to go into the flat fee arena but it was too little too late.

  19. So sad. The big ones become proud that they will last and dominate forever and then they become complacent.

    God bless, Proverbs 31

  20. Never was interested in AOL. Looked like a lot of stupid junk. Their downfall started with the rise of cable internet and wireless routers, all made easier with the start of WindowsXP. Their headquarters was in Sterling, Va.

  21. I remember many years ago when I first got a computer it was AOL for emails and it was good when you got that (you got mail ) ping but today we just get so many much rubbish mails come through it just would not work its sad when things just go out of fashion that was once so good.

  22. AOL was bought for 4.4 Billion dollars in 2015???!!! This has GOT to be some sort of "Mandella Effect" thing….cuz I'm certain that AOL dried up and blew away like at least a decade before that. wow.

  23. Actually, they screwed it up in the early 2000’s not the 90’s. The 90’s was when AOL was in its prime.

  24. I used to use Q-Link before it became AOL. Fond memories of that, but never bought into the AOL thing, had access to internet in the late 80's through schools and early 90's local internet provider. There were other ways to get on the internet outside of those and before AOL too, just AOL became the easiest way for most people

  25. Can you imagine an alternate timeline where AOL actually became a broadband provider and YouTube was actually an AOL Keyword? AOL KEYWORDS!!!!!!! Remember those?!

  26. I watched a few of your excellent videos. I can hardly keep on going cause I need to tell you that the background music is extremely annoying.

  27. I absolutely hated AOL's browser and software. I still have a bunch of pictures I downloaded that I can't even open due to their old proprietary compressed image format. I was so happy being able to simply use Internet Explorer and broadband in the early 00's.

  28. Fun fact, at 3:49 the news paper is in Portuguese and it's called "NOW" and the headline new says "… mouths and calls Eduardo a liar" LMAO

  29. Ah-di-das" LOL! I've never heard anyone pronounce adidas like that! You must not be from America and most certainly not from New York or never even heard of Run DMC Lol!! It' pronounced "A-DI-DAS.

  30. I still have and use my original AOL email account from 1994. I remember paying for the service hourly and then monthly. What I don’t remember is when they stopped charging for the service. I can’t recall the last time I paid for AOL even though I still use it. AOL is so low key now that some people actually think that my email is fake!

  31. My childhood weekends in the 90s was spent going to circuit city and best buy so my grandmother could get a new 30 day free trial of aol because our computer broke down weekly

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