I'd bet there were plenty of people within AOL who knew they were fucked in the long term, and I'm sure some of those actually tried to change things. But it's extremely hard to do anything that threatens existing revenue streams. Eventually the innovative people leave and you're left with the people who can't see the decline or are ok with trying to squeeze the last few drops of cash from the remains.
And really, in some ways they're only around now because they did manage to change a little. They've collected some decent content brands, which was basically an investment in the open internet.
As employees, we weren’t proud of our business tactics, and we griped about
them frequently. The topic came up at company meetings, round table
conversations with executives, and through a lot of water cooler
conversation over email, during lunch, and across the foosball table.
One day my manager showed me a horrible graph. It was pretty simple: the
graph was steady, then it dropped straight down, then after a short period,
the line shot straight back up and stayed level again:
“That’s what happens when we do the right thing”, he said while pointing at
the drop, “and that’s how much money we lose. We tried it just to see how
bad it was for our bottom line. And this is what the data tells us.”
“Wow,” I said, taken aback. My employer clearly had two options: “do the
right thing” or “be profitable”. That was the position they had maneuvered
themselves into through a series of bad management decisions.
My manager then said, “More than half the company would have to lose their
job in order for us to stop these tactics ... so are you volunteering to be
one of them?”
http://www.nasdaq.com/symbol/rnwk/stock-chart?intraday=off&t...
Now they're worth maybe 10% of what they were when that guy left Real Networks.
The thing that kills me here is that they had more than two options. In the short term, sure, they're stuck. But in the long term, they could have either kept sucking or they could have worked to turn it around.
If people quickly found what they wanted, they wouldn't spend any time on your page. Time-spent-on-page is how Yahoo measured engagement, and thus ad-revenue. Improving Yahoo's search engine would have threatened existing revenue streams, and Google would be a terrible investment for them, given the metrics in use at the time.
Competing directly with cable companies in wiring up homes for broadband is a mug's game. This was before it was reasonable to do with fiber and they didn't have anything like Google's freighters full of cash.
So they rode it down. That was probably the right thing to do - their dial up business is still there and still profitable. They have some viable properties on the content side, which is about the best you could have expected without having them get into an entirely new business (like search).
As an investor I'm perfectly capable of taking my dividend and investing in other businesses - I'd rather not have the officers of a company in which I've invested my money taking Hail Mary shots to preserve their jobs.
Reducing expenses to the minimum would basically value all of that at zero, which I think is rarely the right case. Look at the examples in Innovator's Dilemma, for example. The successful companies kept making technology/market transitions, one after the other.
As an investor you are capable of taking the cash and investing elsewhere. But you are also capable of selling the stock if you really think they have no hope of innovating.
None of the big ISP's from the 90's "made it". Earthlink, Netcom, Prodigy... They were all either acquired, went bankrupt, or became DSL resellers. They didn't have any content so they were worthless as broadband took over.
There's only a handful of dot-com's still around from those days. Google, Amazon, eBay, Yahoo... AOL would have ran any of those into the ground had they purchased them, and buying ISP's like XO or Covad wouldn't have worked out well, or buying someone like Sun, Cisco, or SGI would also have been a disaster.
There truly was nothing they could have done.
They bought Time-Warner in 2001 for $164 billion to create AOL Time-Warner. The expected synergies of the acquisition largely failed to materialize, the AOL name was dropped from the combined entity in 2003, and AOL was spun back out of Time-Warner in 2009.
AT&T, Comcast, and Verizon are still chugging along, among others. Some of them aren't household names like Level 3 or CenturyLink.
> There truly was nothing they could have done.
It's 1996, sales are terrible, stock price is in the toilet, the newest product line isn't selling as well, and it was very expensive to develop as it moved to a different CPU architecture. Moreover, the operating system isn't getting better, despite numerous attempts to improve it.
There are numerous newspaper articles saying the company should just fold, and return all the money to the shareholders.
There was nothing they could have done to save the company either.
Except, of course, to bring back Steve Jobs; the company was Apple, and the rest is history.
It's easy to decry the obscene amounts CEOs receive in compensation, but the right one would have been able to right the sinking ship that was AOL. Of course we'll never know if it could have been saved, but it's interesting to think about the position AOL was in, back in the 90's.
The big one was the switch to DSL, which AOL didn't keep pace with. I don't even recall if they did start offering DSL. My internet experience in the 90's was interrupted dial-up and busy signals.
DSL changed all that, but AOL didn't want DSL, so they got left behind. Suddenly, instead of AOL being the cool new thing, it didn't just become staid, it become dysfunctional. Instead of wanting to be on AOL and putting up with busy signals, you kept AOL because you were trapped by the @aol.com email they gave you. The rise of Hotmail took away that last excuse.
I don't know about better search technology, but if AOL had gotten into the online catalog business, Amazon may not even have gotten off the ground. AOL had the brand name recognition, and a warchest to fund something that was clearly going to happen, it was just the small matter of who was going to win. Grocery delivery was unproven, but books? Literally any book in print (and even some out of print) is available in a few days, shipped to your house. Sign me up!
Meanwhile, AOL was content to collect money from their dial-up business.
I actually think buying up ISPs to jump start their entry into the DSL market would have worked out well, or at least slowed the downward spiral. It gets them off the shrinking dial-up as into the nascent high-speed broadband market. The purchase of a backbone internet provider, combined with their purchase of Time Warner in 2000 may have prevented Netflix from getting off the ground, and could have jump started the online video streaming business five years faster.
Finally, buying an equipment manufacture like Sun may not seem like it would have made sense, but with the racks and racks of computers they already owned, a vertically integrated and merged AOL and Sun could started the popularization of cloud services, helped along by their online catalog and online video services.
The benefit of writing this two decades years past AOL's heyday is that hindsight is always 20/20. But saying AOL was doomed, and there was no choice in the matter ignores any possible move they could have done along the way.
Compared to $166 billion, the purchase price of $4.4 billion is not very much at all, but that's still approximately $4.4 billion more money than I have.
AOL may not be the household name it once was, but it did manage to pivot away from the dial-up business, and over to the content business. It's just that the content business, even a $4.4 billion one, is a different market than everyone in America paying you a monthly fee to get on the Internet.
We're in the middle of a similar story with Yahoo, and time will tell if Marissa Mayer is be able to right that ship.
To reinforce your point, Earthlink did jump into the DSL market early and they're still chugging along.
They did. My parents had it in the early 00s. They'd resell the local phone company's DSL but require you to log into the AOL app in order to actually use your connection.
I wonder why!
Instead of being about branding or a political decision to require the user to see an AOL logo, there may have been some technical reason for it. Especially given limitations in Windows 95/98.
They just didn't do all of the above better than the competition.
A major factor that killed AOL was the shift to broadband in the late 90s. AOL had a huge infrastructure and competitive advantage in providing dial-up access to consumers. As the Internet grew, though, consumers got hungrier for bandwidth, they got hungrier for content, and the relative share of both of these resources that was not owned by AOL increased. It was easy to justify subscribing to AOL when they were $10/month for 56.6K access, your local ISP was $10/month for 56.6K access, but AOL gave you all this extra content. It was a lot harder when you could pay $30/month for 500K/sec ADSL or Cable access that unlocked a whole world of multimedia content. AOL owned none of the infrastructure that made the broadband net possible.
GFiber, Loon, and cell phones risk doing the same thing to Comcast, TWC, and Verizon FIOS now.
[1] http://en.wikipedia.org/wiki/AOL#1990s:_a_new_Internet_age
None of the big ISP's from the 90's "made it". Earthlink, Netcom, Prodigy... They were all either acquired, went bankrupt, or became DSL resellers. They didn't have any content so they were worthless as broadband took over.
There's only a handful of dot-com's still around from those days. Google, Amazon, eBay, Yahoo... AOL would have ran any of those into the ground had they purchased them, and buying ISP's like XO or Covad wouldn't have worked out well, or buying someone like Sun, Cisco, or SGI would also have been a disaster.
They failed to do all of the above, and are now in the dustbin of history (and to me, are solely remembered for their acquisition of nullsoft who then created Gnutella - predecessor of P2P file sharing services).