Science & Technology

AOL Kicked To Street By Time Warner


Internet and email provider AOL, which bought Time Warner a little less than a decade ago for $147 billion (and in many way signalling the peak of the tech-bubble-boom; a year later AOL Time Warner was writing off $99 billion in losses), is being sent out to face the 21st on its lonesome. The split should be complete by year's end:

"Becoming a stand-alone public company positions AOL to strengthen its core businesses, deliver new and innovative products and services, and enhance our strategic options," said Tim Armstrong, AOL's chairman and chief executive officer. "We play in a very competitive landscape and will be using our new status to retain and attract top talent."

Rots o' ruck, buddy, especially if you can't stop talking in corporatese. More here.

This final breakup scene reminds me of the absolute hysteria that the AOL Time Warner merger whipped up at the time, when nothing less than the fate of the Republic was at hand. The new behemoth on the media block would, don't you know, never print any news critical of anything vaguely related to any of the companies or interests of AOL Time Warner. The web and cable shows/sites would just become uncritical shills for every goddamned product under the sun and real journalism would take a backseat to the sort of celebrity jock-sniffing that drives so much traffic to The Huffington Post. We would never again hear a critical word uttered about the Batman franchise, gazillionaire fatcats, that Man in the White House, or ever get to see a Woman there. You know the drill.

Back in 2000, I wrote about the heavy burden of market dominance, when a company often has to start giving away its product to maintain its market share. That was a situation that was overtaking AOL at just that moment, which was giving away ever-larger numbers of free hours of access to lure customers.

In a relatively free market, companies get big and stay big primarily by giving people what they want—and often more than they want—at pretty good prices. They may be brutally competitive with other firms but they tend to put on kid gloves when it comes to the customer.

Examples of this abound throughout the economy, where the big kids on the block tend to act more like buddies than bullies: Think of Coca-Cola, which dominates the U.S. soft drink market with a 44 percent share (and two-thirds of fountain sales). When's the last time Coke raised its prices? Over at least the past 20 years, a 2-liter bottle of Coke—or Diet Coke, or Caffeine Free Diet Coke, or Cherry Coke, or any of its proliferating sub-brands—has rarely wandered out of the 99 cents-$1.50 range.

The same goes for McDonald's, which rules the U.S. fast-food market with a 43 percent share. McDonald's is so desperate for customers that it's held prices essentially constant over the past two decades, while boosting portion sizes (burgers, fries, and drinks are all bigger than they used to be), expanding its menu, and building elaborate play structures for kids while simultaneously throwing increasingly sophisticated toys at them. In the case of McDonald's, such tactics have not even been particularly successful: Despite maintaining its top niche position, the Golden Arches continues to leak market share to an increasing number of rivals.

More here. 

At its peak, AOL had something like 27 million dial-up subscribers (it also had a ton of bring-your-own-access customers) and it still has on the order of 6 million dial-up folks, along with a number of popular content sites (best known is TMZ) and other services (AIM is still the king of instant messaging). The email service went free years ago of course, and there are literally millions of legitimate complaints from users scattered around the intertubes like so many Jack T. Chick tracts hoping to be read. And don't even get me started on Time Warner's early rollout of the Roadrunner service, which seemed to be run by Wile E. Coyote based on its ability to deliver only bangs for the buck in the late '90s.

But as an AOL user since 1993, I'd like to say that for all the abuse the company and its users took over the years (remember back when Usenet groups would snobbishly flame you for simply having an AOL address? Recall all the moral panics about the anonymity afforded users by dint of weird handles back when most services were enforcing transparency in email identities?), it was almost always there when I needed it, just an overly expensive phone call away. Which is far more than I could say for most of the ISPs I tried out in the early 1990s, including a couple of university-based ones.

Good luck AOL, lingering on into the future like an A&P grocery store, a fading retrovirus of a once vast commercial empire reduced to virtual nothingness. I'll be happy to bore my grandchildren with tales of AOL's past grandeur when they note that weird unused icon on their thumbnail computers from MSAPPLE in the year 2040.