For millions of PC users in the 1990s, “going online” meant
connecting to America Online. However, this once domi-
nant service provider has had difficulty adapting to the
changing world of the Internet.
By the mid-1980s a growing number of PC users were
starting to go online, mainly dialing up small bulletin board
services. Generally these were run by individuals from their
homes, offering a forum for discussion and a way for users
to upload and download games and other free software and
shareware. However, some
entrepreneurs saw the possibility of creating a commercial
information service that would be interesting and useful
enough that users would pay a monthly subscription fee
for access. Perhaps the first such enterprise to be successful
was Quantum Computer Services, founded by Jim Kimsey
in 1985 and soon joined by another young entrepreneur,
Steve Case. Their strategy was to team up with personal
computer makers such as Commodore, Apple, and IBM to
provide special online services for their users.
In 1989 Quantum Link changed its name to America
Online (AOL). In 1991 Steve Case became CEO, taking over
from the retiring Kimsey. Case’s approach to marketing AOL
was to aim the service at novice PC users who had trouble
mastering arcane DOS (disk operating system) commands
and interacting with text-based bulletin boards and primi-
tive terminal programs. As an alternative, AOL provided a
complete software package that managed the user’s connec-
tion, presented “friendly” graphics, and offered point-and-
click access to features.
Chat rooms and discussion boards were also expanded
and offered in a variety of formats for casual and more for-
mal use. Gaming, too, was a major emphasis of the early
AOL, with some of the first online multiplayer fantasy role-
playing games such as a version of Dungeons and Dragons
called Neverwinter Nights (see online games). A third pop-
ular application has been instant messaging (IM), including
a feature that allowed users to set up “buddy lists” of their
friends and keep track of when they were online
Internet Challenge
By 1996 the World Wide Web was becoming popular Rather than signing up with a proprie-
tary service such as AOL, users could simply get an account
with a lower-cost direct-connection service (see Internet
service provider) and then use a Web browser such as
Netscape to access information and services. AOL was slow
in adapting to the growing use of the Internet. At first, the
service provided only limited access to the Web (and only
through its proprietary software). Gradually, however, AOL
offered a more seamless Web experience, allowing users to
run their own browsers and other software together with
the proprietary interface. Also, responding to competition,
AOL replaced its hourly rates with a flat monthly fee ($19.95
at first).
Overall, AOL increasingly struggled with trying to ful-
fill two distinct roles: Internet access provider and content
provider. By the late 1990s AOL’s monthly rates were higher
than those of “no frills” access providers such as NetZero.
AOL tried to compensate for this by offering integration of
services (such as e-mail, chat, and instant messaging) and
news and other content not available on the open Internet.
AOL also tried to shore up its user base with aggressive
marketing to users who wanted to go online but were not
sure how to do so. Especially during the late 1990s, AOL
was able to swell its user rolls to nearly 30 million, largely
by providing millions of free CDs (such as in magazine
inserts) that included a setup program and up to a month of
free service. But while it was easy to get started with AOL,
some users began to complain that the service would keep
billing them even after they had repeatedly attempted to
cancel it. Meanwhile, AOL users got little respect from the
more sophisticated inhabitants of cyberspace, who often
complained that the clueless “newbies” were cluttering
newsgroups and chat rooms.
In 2000 AOL and Time Warner merged. At the time, the
deal was hailed as one of the greatest mergers in corporate
America Online (AOL) was a major online portal in the 1990s,
but has faced challenges adapting to the modern world of the
Web. (Screen image credit: AOL)
history, bringing together one of the foremost Internet com-
panies with one of the biggest traditional media companies.
The hope was that the new $350 billion company would
be able to leverage its huge subscriber base and rich media
resources to dominate the online world.
From Service to Content Provider
By the 2000s, however, an increasing number of people
were switching from dial-up to high-speed broadband Inter-
net access rather than subscribing to ser-
vices such as AOL simply to get online. This trend and the
overall decline in the Internet economy early in the decade
(the “dot-bust”) contributed to a record loss of $99 billion
for the combined company in 2002. In a shakeup, Time-
Warner dropped “AOL” from its name, and Steve Case was
replaced as executive chairman. The company increasingly
began to shift its focus to providing content and services
that would attract people who were already online, with
revenue coming from advertising instead of subscriptions.
In October 2006 the AOL division of Time-Warner
(which by then had dropped the full name America Online)
announced that it would provide a new interface and soft-
ware optimized for broadband users. AOL’s OpenRide
desktop presents users with multiple windows for e-mail,
instant messaging, Web browsing, and media (video and
music), with other free services available as well. These
offerings are designed to compete in a marketplace where
the company faces stiff competition from other major Inter-
net presences who have been using the advertising-based
model for years
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