Wither AOL?

Once upon a time, before the Internet, the only way you could get access to content and resources was through dial up modems connected to dedicated information gateways, the mightiest of these was America Online (AOL). Now we hear that AOL is retreating from offshore and looking to offer its once great ‘crown jewels’ for – well for free.

Back in January 2000 AOL was at its zenith and it announced to the world that it would be merging with the struggling media giant Time Warner. The combined company had a reported 100 million paying subscribers (note this includes cable etc) and an estimated net worth of $350bn – it was set for the future and could do no wrong. The strengths of paying network customers and Time Warner’s vast library of content would create a new super power in the information age.

How thing have changed in a short few years. AOL and Time Warner, at the end of 2003 the company dropped the AOL part and re-branded itself Time Warner again and the market capitalisation has plummeted to $72bn.

It seemed that AOL Time Warner was really never able to capitalise on the rich media assets that it had in the war chest, it seems that AOL’s obsession with moving into broadband late and of ‘nannying’ the customers with limited access to the rest of the internets rich assets appearing at an exponential daily rate on hurt as well.

The real problems are simple and endemic in the organisation itself. Time Warner was a series of media organisations within an umbrella organisation – each run by a series of chieftains, jealously guarding their own private fiefdoms within the structure. – massive restructuring in the following few years did nothing to help or deviate from the problems. AOL for its part acted like a Soviet company, reacting slowly changes and treating its customers with complete disdain. When it was forced to react it did so after the rest of the industry, never before – in short it relied very much on inertia.

So AOL is losing subscribers faster than it can cope with at the moment, it is estimated that it currently has 18.6 million subscribers, though this is a drop of 835,000 from the previous quarter. The reason?  No one is prepared to pay subscription for internet services where there is little perceived value add – this was AOL’s original USP – as such AOL have announced that they will increasingly drop service charges and give services away for free.

Outside of the USA AOL is caught up in a broadband bloodbath, in the UK, France and the rest of Europe broadband access services are now seen as a mere commodity, in many cases the services are bundled free with other services – so the thought of paying an extra $29 per month wouldn’t warrant consideration from most customers.

In the UK, as we’ve reported, AOL is up for sale and is likely to disappear as a brand in a very short time once a suitor has been found –though the laughable valuation put forward by AOL of its UK branch has been a stumbling block for some time. However, it must go – so we expect announcements any time soon that a suitor has been found and a reasonable price set – possibly BskyB.

Sources 

 AOL mulls free services: source Reuters

AOL Said to Be Planning Free Ad-Based Web Access NY Times

AOL dotcom madness in UK The Business News Source