Commentary

Great Moments in the Decline and Fall of AOL

Ignoring the ignominious start as a failed gaming platform that consumes about 5 of the cat's nine lives, we skip ahead to 1985 -- when ex-Pizza Hut manager of new pizza marketing and now marketing consultant Steve Case helps James V. Kimsey, ex-GI and barkeep, found Quantum Computer Services, an online services company, from the remnants of Control Video Corporation. Case helps invent the concept of chat rooms and positions the company as the Internet on training wheels because everything else in the market like Prodigy, CompuServe, and GEnie is too complicated. In October 1989, Quantum changes the service's name to America Online. Everyone in the nation is happy for about 20 minutes.

AOL starts its long legacy of pissing off the world by sending everyone on the planet 14 copies of system discs they never ask for. They fall out of magazines; they turn up in cereal boxes. They are more insidious than black plague fleas. Only larger and shinier and less eco-friendly. In 2000, AOL is served with an $8 billion lawsuit alleging that its software causes significant difficulties for users attempting to use third-party Internet service providers. The lawsuit seeks damages of up to $1000 for each user who had downloaded the software cited at the time of the lawsuit. AOL later agrees to a settlement of $15 million, without admission of wrongdoing.

Next, AOL signs up so many users that it can't handle the bandwidth demand (even though users are tapping in at a tuberculosis-ridden-snail-like 9600 baud. "AOL" to many becomes "Always Off-Line." Once on, users are further abused. A successful class action lawsuit forces AOL to stop rounding up "used minutes" to the next whole minute. AOL claims this is to account for sign on/sign off time, but because this practice is not made known to its customers, the plaintiffs win. The bad karma spreads. More Americans are pissed off.

Users who try to quit engage in titanic struggles with "customer service," helping profanity move into the mainstream of American vernacular. People who successfully quit the service are profiled in local newspapers as heroes. Demimondaine devotee Eliot Spitzer launches an inquiry into AOL's customer service policies, finding that the company has an elaborate scheme for rewarding employees who purport to retain or "save" subscribers who had called to cancel their service.

In many instances, such retention is done against subscribers' wishes, or without their consent. Under the scheme, consumer service personnel receive bonuses worth tens of thousands of dollars if they successfully dissuade or "save" half of the people who call to cancel service. AOL ends up paying a $1.25 million penalty to the state of New York.

In 1996, AOL moves from a per-hour charge to a flat rate of $19.99 a month, and strikes a deal to be bundled with Windows. It becomes the single largest piece of crapware ever invented. In July 2006, AOL is rated #4 in an article entitled "10 Worst Computer Gimmicks of Recent Times."

Steve Case and Gerald Levin meet in Mexico and consume 12 times the normal dose of peyote. Subsequently, AOL purchases Time Warner for $164 billion, ignoring a far higher offer from Paramount.

Shareholder value plunges. Employee stock options go permanently underwater. This forces a goodwill writeoff, causing AOL Time Warner to report a loss of $99 billion in 2002 -- at the time, the largest loss ever reported by a company. Yet more writeoffs continue annually. Time Warner battles the Securities and Exchange Commission and the Justice Department over pre-acquisition accounting scandals at AOL. "Round tripping" enters the business lexicon. The company pays hundreds of millions in fines and starts a tradition of throwing former executives under the bus.

Pissed off by a decade of arrogant ad-selling by AOL, most of Madison Avenue refuses to do business with AOL, no matter how many fresh starts are promised by Time Warner management. Ron and Randy are brought in to reorganize sales, but fail as predicted by all who work with them. As the online pioneer continues to sink in the stink, it starts laying off employees, choosing the humane pre-Christmas season to end careers. As broadband spreads, AOL's dial-up business evaporates.

People with an AOL e mail address are subject to public beatings. Richard Parsons, who presides over most of the tawdry history of Time Warner and AOL, is asked by the feds to help save Citibank. Clearly, there is no accounting for track record. Time Warner, its stock near an all-time low, decides it is finally time to jettison AOL and hands the company to charismatic Tim Armstrong. Tim continues the tradition of layoffs and apologies, and launches an in-house ad campaign that has the online and advertising industries asking each other -- WTF?

With Thanksgiving behind us and Christmas in the headlights, it could only mean one thing -- more layoffs at AOL.

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2 comments about "Great Moments in the Decline and Fall of AOL ".
  1. Al Silverstein from Active International , November 30, 2009 at 10:14 a.m.

    Good summary. I still use AOL as an address where I direct all my accounts, subscriptions etc. where I am likely to get spamed.

  2. Jerry Foster from Energraphics , December 1, 2009 at 8:03 a.m.

    Amusing article. I have a soft spot for AOL...err...I mean Aol. now. I still have 5 email addresses which have been in operation for 15 years and where people can find me after such a long period of time. Even in the modern age, I have used their dial up in the past two years to get on the Internet in an emergency when that was the only way. It may be just emotion, but AOL...oops Aol. has been a big part of my life and I cannot feel bitter about them.

    I also had friends there who were laid off recently.