The Rise And Fall (And Rise?) Of AOL - InformationWeek

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The Rise And Fall (And Rise?) Of AOL

AOL, which recently abandoned its "pay-to-play" model, is now trying to succeed as a free service in a very crowded marketplace. Can it succeed? We look at AOL's past and its possible future.

America Online Is Born
In 1989, Quantum enabled AppleLink and PC-Link users to talk together online via a service dubbed "America Online." Although the AppleLink and PC-Link services were still run separately, users could send e-mail from one service to the other. Later that year, the AppleLink and PC-Link monikers were completely dropped; the former AppleLink and PC-Link services were now called America Online.

The name change for the entire company would come two years later, in 1991. It was also around this time that the average PC user was finally able to join America Online using a graphic interface called GeoWorks overlaid over the DOS operating system. The company wouldn't move to Windows until 1993.

American Online finally went to Windows in 1993.
Click image to enlarge.

AOL soon found its niche: As a safe place for beginners on the Internet, especially for children, through a walled garden (restrictive) approach to the Internet. AOL's association with user-centric Apple also underscored AOL's commitment to make its own service user-friendly.

And some of AOL's early initiatives were groundbreaking. For example, in its days as Quantum, it partnered with LucasFilm to produce the online game Habitat, one of the first attempts to build a large-scale commercial multiuser virtual environment, and its offspring Club Caribe. In 1996, AOL debuted AOL Instant Messenger (AIM), which helped bring instant messaging to the masses.

However, this same approach soon made it the target of the tech-savvy, who objected to its restrictive approach to the Web, and derided the inexperience of its user base. "AOL was considered Internet training wheels," says branding consultant Rob Frankel. "It offered a closed system on the Web. It had mainframes that cached the Web and offered people appropriate pages. AOL thought it could keep people captive."

The Rise And Fall Of AOL

•  The Beginning

•  AOL Is Born

•  Does AOL Get It?

•  Will Work For Free

 AOL Pop-Up Timeline

If AOL executives did think that, it soon became clear they were mistaken. By the end of the 1990's, even non-technical users were becoming comfortable exploring the Web and discovering that other ISPs would give them unlimited access to the "information superhighway." But while some users left AOL, more joined, encouraged by AOL's simple interface and the thousands of floppies (and later CDs) with which it flooded mailboxes.

A Fateful Merger
In January, 2000, after years of steadily increasing subscribers, AOL announced that it planned to buy Time Warner in a move that was supposed to position AOL as a media powerhouse. The deal was finally approved a year later.

The new company was called AOL Time Warner, and the deal was touted as creating the world's first fully integrated media and communications company. The purchase was conducted in an all-stock deal and was valued at $350 billion. As a result, AOL gained access to CNN, Warner Brothers., and Sports Illustrated, highly valued Time Warner properties. Steve Case, the chairman and chief executive of AOL, became chairman of the board of the new company, while Time Warner's Gerald Levin took the reins as AOL Time Warner's CEO. The company had more than 100 million subscribers and 80,000 employees. But steering such a large ship soon became a challenge.

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