USA Today
SAN FRANCISCO — In a year steeped in significant anniversaries for tech companies, one that has been largely ignored is the 25th of online pioneer AOL.
Today, the company originally known as Quantum Computer Services, which introduced millions of Americans to the Internet, is still around but not what it used to be.
Sales are declining and its subscriber base is dwindling as it copes with a slide in online advertising revenue and tries to recast itself amid stiffening competition.
AOL has been trying to reinvent itself as a content and advertising company since it regained its independence last year from media giant Time Warner, with which it merged in 2001. Time Warner spun off AOL to shareholders in December, ending what many experts called the most disastrous corporate merger ever.
Which leads to the question: Can AOL regain its mojo?
As the company enters Year 26 of its existence, its current CEO and one of its founders both think it can, as they reflect on AOL's past, present and future.
"Sure, it will be around for a long time," AOL co-founder Steve Case says. "The question is, how do you return it to being a leader. I think (AOL CEO) Tim (Armstrong) is on the right track."
Adds Armstrong: "The AOL brand is still one of the most meaningful in Internet history. In many cases, it was (people's) first (experience) online."
America Online took consumers by storm in the 1990s as a dial-up Internet company. During its heyday, it helped redefine how people communicate, ushering in an era of PCs with built-in modems and chat-room conversations. It was even the subject of a Tom Hanks-Meg Ryan romantic comedy, You've Got Mail, in 1998.
At its zenith, AOL had nearly 30 million members.
But its glory was short-lived in the fast-paced digital age. Dial-up business shriveled over the years as faster broadband connections from cable and phone providers have become increasingly popular. During its most recently announced quarterly results, in late April, AOL said its dial-up Internet service revenue sank 28% to $283 million, and its advertising revenue slid 19% to $354 million.
Even deeper, AOL could not shake the stigma of being considered a website for "newbies," says Ken Lim, chief futurist at CyberMedia Convergence Consulting.
The advent of search engines meant more competition, offering consumers a cornucopia of other content-based sites. "The growth of search engines opened up the Internet, and made it OK to leave the walled garden of an AOL for safer alternatives," Lim says.
And yet, AOL remains one of the most recognizable brands in the world and a big draw. It ranked No. 5, in traffic, among all U.S. Web properties in April, with 115 million unique visitors, according to market researcher ComScore. (Google was No. 1, with 176 million unique visitors.)
"Not bad at all," analyst Lim says. "But AOL needs to figure out a way to maintain and grow that. Like everyone else, it comes down to monetization."
Reinventing AOL
The key to AOL's present and future lies in its ability to be the go-to content creator for emerging online platforms on Apple, Facebook and Google, where hundreds of millions of people congregate, Armstrong says.
AOL has been working to recast itself as a large-scale content and advertising business, operating websites such as tech blog Engadget, sports specialist FanHouse and personal-finance site WalletPop. It also is gearing up to launch Patch, a network of dozens of community news sites to scoop up local online ads.
"We're like the Procter & Gamble of the Web," Armstrong says.
But the process has been difficult, with advertising revenue dropping throughout last year. Revenue for search and display advertising suffered double-digit percentage declines, and the company said it expects ad sales to continue falling for the rest of the year.
That forced AOL earlier this year to shed 2,300 workers as part of a plan to slash operating expenses by $139 million through payroll cuts and exiting unprofitable businesses.
Last month, AOL announced a deal with Digital Sky Technologies, an Internet company targeting Russian-speaking markets, to buy its ICQ instant-messaging service for $188 million. Additionally, AOL acknowledged it is evaluating the sale or shutdown of its Bebo social networking site this year.
It's all part of a roller-coaster ride for AOL, which has survived wrenching changes in a fast-paced industry that is maturing. This year, Microsoft turned 35 years old, and Cisco Systems celebrated its 25th anniversary. Next year, Apple turns 35 and IBM a century old.
"AOL was at the epicenter of the Internet being the hot thing," Case says.
"It was a struggle, and hardly an overnight success," Case says, noting it took AOL seven years from its creation in 1985 to reach 200,000 customers.
"But we stuck with it and made our mark," he says. "We believed that some day the online medium would be ubiquitous."
Today, the company originally known as Quantum Computer Services, which introduced millions of Americans to the Internet, is still around but not what it used to be.
Sales are declining and its subscriber base is dwindling as it copes with a slide in online advertising revenue and tries to recast itself amid stiffening competition.
AOL has been trying to reinvent itself as a content and advertising company since it regained its independence last year from media giant Time Warner, with which it merged in 2001. Time Warner spun off AOL to shareholders in December, ending what many experts called the most disastrous corporate merger ever.
Which leads to the question: Can AOL regain its mojo?
As the company enters Year 26 of its existence, its current CEO and one of its founders both think it can, as they reflect on AOL's past, present and future.
"Sure, it will be around for a long time," AOL co-founder Steve Case says. "The question is, how do you return it to being a leader. I think (AOL CEO) Tim (Armstrong) is on the right track."
Adds Armstrong: "The AOL brand is still one of the most meaningful in Internet history. In many cases, it was (people's) first (experience) online."
America Online took consumers by storm in the 1990s as a dial-up Internet company. During its heyday, it helped redefine how people communicate, ushering in an era of PCs with built-in modems and chat-room conversations. It was even the subject of a Tom Hanks-Meg Ryan romantic comedy, You've Got Mail, in 1998.
At its zenith, AOL had nearly 30 million members.
But its glory was short-lived in the fast-paced digital age. Dial-up business shriveled over the years as faster broadband connections from cable and phone providers have become increasingly popular. During its most recently announced quarterly results, in late April, AOL said its dial-up Internet service revenue sank 28% to $283 million, and its advertising revenue slid 19% to $354 million.
Even deeper, AOL could not shake the stigma of being considered a website for "newbies," says Ken Lim, chief futurist at CyberMedia Convergence Consulting.
The advent of search engines meant more competition, offering consumers a cornucopia of other content-based sites. "The growth of search engines opened up the Internet, and made it OK to leave the walled garden of an AOL for safer alternatives," Lim says.
And yet, AOL remains one of the most recognizable brands in the world and a big draw. It ranked No. 5, in traffic, among all U.S. Web properties in April, with 115 million unique visitors, according to market researcher ComScore. (Google was No. 1, with 176 million unique visitors.)
"Not bad at all," analyst Lim says. "But AOL needs to figure out a way to maintain and grow that. Like everyone else, it comes down to monetization."
Reinventing AOL
The key to AOL's present and future lies in its ability to be the go-to content creator for emerging online platforms on Apple, Facebook and Google, where hundreds of millions of people congregate, Armstrong says.
AOL has been working to recast itself as a large-scale content and advertising business, operating websites such as tech blog Engadget, sports specialist FanHouse and personal-finance site WalletPop. It also is gearing up to launch Patch, a network of dozens of community news sites to scoop up local online ads.
"We're like the Procter & Gamble of the Web," Armstrong says.
But the process has been difficult, with advertising revenue dropping throughout last year. Revenue for search and display advertising suffered double-digit percentage declines, and the company said it expects ad sales to continue falling for the rest of the year.
That forced AOL earlier this year to shed 2,300 workers as part of a plan to slash operating expenses by $139 million through payroll cuts and exiting unprofitable businesses.
Last month, AOL announced a deal with Digital Sky Technologies, an Internet company targeting Russian-speaking markets, to buy its ICQ instant-messaging service for $188 million. Additionally, AOL acknowledged it is evaluating the sale or shutdown of its Bebo social networking site this year.
It's all part of a roller-coaster ride for AOL, which has survived wrenching changes in a fast-paced industry that is maturing. This year, Microsoft turned 35 years old, and Cisco Systems celebrated its 25th anniversary. Next year, Apple turns 35 and IBM a century old.
"AOL was at the epicenter of the Internet being the hot thing," Case says.
"It was a struggle, and hardly an overnight success," Case says, noting it took AOL seven years from its creation in 1985 to reach 200,000 customers.
"But we stuck with it and made our mark," he says. "We believed that some day the online medium would be ubiquitous."
