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Practice English Speaking&Listening with: What Happened to America Online? [LGR Tech Tales]

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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

using AOL to get online,

the monolithic service seemed unstoppable.

But other than the occasional story about how they 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 largest media 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-up service turned multimedia empire,

America Online.

The story of AOL picks up in 1988.

Quantum Computer Services had been running their own dial-up online service

called Quantum Link.

This was a highly ambitious, but only moderately 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 with Commodore 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 and download 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 they deemed responsible at the company,

like the co-founder, Bill Von Meister,

and Quantum Link was created for the Commodore 64 as a result,

using similar ideas of online connectivity.

But the user base for that system was decreasing all the time,

and Quantum's cash reserve was dwindling fast

and their debts were piling up.

Coincidentally, Apple Computer was also having cash flow problems

with their own online service called AppleLink.

General Electric's Information Services, or GEIS,

provided the server and software backend for AppleLink.

But since it was so expensive, it was only 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 reconfiguring AppleLink for this purpose,

while also providing online services 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 spearheading much of the company's direction

since introducing Quantum Link.

They reached an agreement to create a home computer version of AppleLink,

based on the protocols provided by Quantum Link.

while also borrowing from a graphical user interface developed by General Electric

called Business Talk.

While all of this seemed promising,

Apple proved to be hard to get along with from the start.

Not only did they drag out development time by demanding constant changes

to make it fit Apple's strict design language,

but they refused Quantum's suggestions to bundle the software with new computers.

Apple also enforced a particular set of limitations on how Quantum could advertise the product,

an approach that turned out to be costly

and not as effective as what Quantum thought they could do in-house.

Eventually, the final result was AppleLink: Personal Edition,

released in May of 1988

at the San Francisco AppleFest.

The users that actually bought it were impressed with it.

But due to the lackluster marketing and the fact that Apple was arguably overcharging for it,

at up to $15 an hour to use,

AppleLink: Personal Edition was 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 had made 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 directors at Quantum blamed Steve Case.

They wanted him gone.

However, Quantum CEO Jim Kimsey was not having any of it.

Behind the scenes, he had been prepping Steve Case to 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 the stage for the future in 1989

by working with their Chief Technology Officer, Mark Seriff,

to revisit AppleLink and tweak it into something that was less associated with Apple.

They called it

"America Online,"

a name meant to imply a larger, more nationwide service for every American.

There was some debate about the 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 to be 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 widespread audio-visually impressive websites,

visiting a channel on AOL was a treat for the senses,

many of which was unique with complete branding for whatever their product was.

And typing in simple keywords made 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 time people heard this when signing on:

AOL VOICE: "Welcome!"

"You've got mail!"

LGR: Ahh, that friendly voice alone made getting online worthwhile.

It also had a game called Quantum Space that users could play,

which was the first fully automated play-by-email video game,

developed by Stormfront Studios.

And after convincing Steve Case it was technically feasible,

Stormfront made another game exclusively for AOL subscribers in 1991:

Neverwinter Nights,

co-developed with TSR and SSI,

using their Gold Box Engine for Dungeons & Dragons games.

It was the first massively multiplayer online role-playing game

to feature graphics, not just text,

and allowed up to 50 players to play together in each server.

Neverwinter Nights paired nicely with the first 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 of the first version of AOL for Windows,

they decided to take the company public

raising $66 million in the process.

Shortly after this, Steve Case was made the CEO of the company,

now named America Online Incorporated,

with Jim Kimsey taking the seat of Chairman the company.

Oddly enough, this was the second time 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 company about to go public on the stock market.

But now that they had tons of 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 release of the children's book "Corduroy"

was the result of her work at Newfield Publications,

where under her direction they had sent out free copies of the book to prospective customers.

It had worked brilliantly and they made 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 service providers 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 budget of around a quarter-million dollars

to try out the idea.

And it's less than it sounds like, too,

since the cost of producing each floppy disk alone was $1.09,

and they still had packaging and 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 up as soon as they got the disk in hand,

AOL knew they'd struck gold.

Before long, AOL floppy disks and CD-ROMs were 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 produced worldwide 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 Kimsey out 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 that afterward, Gates said to an associate:

And so Gates and his team began working on 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" email addresses for every AOL subscriber,

access to the vast Usenet distributed discussion system,

and an exciting new network, the World Wide Web.

Yes, the Internet was finally available on AOL.

Browsers like NCSA Mosaic and later Netscape Navigator

were making Internet usage easier all the time,

so it only made sense for AOL to include their own access.

By 1994, they had discontinued Q-Link and PC-Link entirely

to focus on America Online exclusively.

And combined with the introduction of internet 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 before widespread search engines.

1996 was also the year that, with over five million monthly subscribers,

they introduced flat-rate unlimited-use subscription plans,

as well as generous amounts of free hours 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 differences and reached an agreement with Microsoft

to bundle America Online software in every 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 getting busy signals when signing in as a result.

Remember, this was all still dial-up.

So if the local AOL phone line was used up, then tough luck!

You had to try another one or wait it out.

But even with thousands of frustrated cancellations occurring,

AOL grew to over ten million users,

and the money was coming in faster 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 purchase of none other than CompuServe in 1998,

along with the instant messaging service ICQ

two of the main competitors to America Online and AIM.

MovieFone was another big purchase,

once a pioneering automated phone service,

that had turned into a huge website for looking 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 the dominant browser for years,

but with Microsoft's Internet Explorer gaining so 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 either became 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 of Time, Inc. and Warner Communications.

Teaming up with America Online created the largest 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 web market 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 lost by countless web-based businesses,

leading to a major recession in the United States and Europe.

This was also during a time that websites were getting more advanced,

and dial-up remained just as slow.

And users were starting to jump ship to broadband internet services,

something that AOL did not yet provide.

Combined with fact that the corporate cultures of AOL and Time Warner just didn't mesh at all,

and online advertising rates were rapidly 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 biggest annual 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 investigation into 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 as everyone called them that anyway.

And with it came quite a few changes over the next few years.

Like laying off 40 percent of their workforce,

and moving their corporate headquarters from 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 Speed broadband service bundle was a bust,

being discontinued in 2004.

It had failed to attract customers

since AOL relied on local telecom companies for DSL connections.

And since phone and cable companies often bundled DSL with other services,

and undercut AOL,

there was little incentive to pay for 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 Facebook in total users in certain countries.

AOL Time Warner acquired Bebo for $850 million.

Which seemed like a bargain compared to the valuation of MySpace at the time at $15 billion.

Suffice to say, the actual value of services like Bebo would prove to be vastly overestimated,

and Bebo filed for Chapter 11 bankruptcy 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 thing as an independent company again.

And now under the direction of ex-Googler Tim Armstrong,

AOL all but left behind its past as an Internet service provider,

and embraced the new world of new media.

They ended up acquiring several companies and websites in this area,

like Patch Media,

Weblogs, Inc.,

TechCrunch,

and The Huffington Post,

among many others.

They also won the affections of Verizon 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 its advertising 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 to purchase 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 like IntelliHome and U.S. Online Communications.

and also formed the Seriff Foundation as a philanthropic effort.

Jim Kimsey retired from AOL in 1995,

going on to serve as Chairman of Refugees International,

while also working with the private 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 Time Warner board of directors until 2005,

when he left to spend more time working on his investment firm, Revolution, LLC,

and is also currently working with politicians 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 more startups over the next ten years,

but he didn't stay at any of them for 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 for all of his efforts except a plaque

at the Palm Restaurant in Washington, D.C.

And that was seemingly because he bought more vintage Scotch there than anyone else.

When Steve Case spoke at a memorial service for Bill, he opened with:

Indeed, without a long string of 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 online services 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.

The Description of What Happened to America Online? [LGR Tech Tales]