Tom Grubisich, a screenwriter based in Santa Monica, was managing editor/local news for AOL’s Digital City from 1997 to 2001. He wrote “Grassroots journalism: Actual content versus shining ideal” on OJR in October 2005. He can be reached at TomEditor@msn.com.
In a much-quoted recent essay in the Washington Post, AOL co-founder Steve Case said it was time to “liberate” AOL from the merger with Time Warner that he masterminded in 2001. “[AOL] must be freed from its corporate shackles and return to its entrepreneurial roots … ,” he wrote. Those are stirring words that Case flings like a gauntlet against the corporate door of Time Warner. But it was Case himself who had the opportunity to “liberate” AOL years before it was overtaken by Yahoo! and other Internet majors — and he muffed it.
The critical time for AOL was the hinge year 1997, when the World Wide Web quite suddenly became as easy to reach as the cup of coffee next to your computer. No longer did you have to be a Web Warrior willing to brave broken connections or uncharted destinations — the cybernetic universe was suddenly a marble in the palm of your hand. 1997 was the year that Microsoft boldly integrated its Internet Explorer browser into its operating system. Since virtually every computer was operated by Microsoft software, all a user now had to do to go on the Internet was click the Internet Explorer icon, a blue, lower-case “e” with a Jupiter-like ring.
Months after Microsoft’s coup, AOL, which was always looking over its shoulder at what Microsoft was doing, made its own bold move by presenting a grand vision for aol.com, making the site much more than the company’s Web placeholder. In an interview in the Washington Post on Dec. 9, 1997, Case explained why: “There’s lots of people who are connected through offices or through schools or through some other forum that basically has AOL sort of on the periphery. We feel we get an opportunity to play a broader role outside of the specific role we’ve got. And we’ve stepped up those efforts in the past six months or so. AOL.com, which is a web site that originally was designed to be a dashboard from AOL into the Web, is being enhanced through a variety of different things to make it more of a competitor to … search engines and content aggregators.”
In 1997, Yahoo! was still behind AOL in the struggle for eyeballs, and Google had only just crawled from its creators’ Stanford cradle. But Case had the foresight to see what was coming. He knew AOL had to play two hands. One hand the company already held — strong membership numbers. AOL was the established, fast-growing members-only service, which hit 10 million member accounts worldwide (9 million in the U.S.) in November 1997. But Case still had to draw his other hand. It was in the unwalled vastness of the Internet, which by late 1997 had attracted 56 million users in the U.S. Aol.com would allow the company to reach into that expanse.
Case’s timing was perfect. Through the new website, the mother company would be able to attract growing millions of new users outside of AOL’s walled garden. Aol.com would be a place where company programmers and engineers could test new content in real time, not in focus groups, and launch some of it on platforms tied to the enormous potential of just-emerging high-speed modems.
On AOL itself, programming had previously been bound by three sets of shackles. First, content had to be carefully pre-chewed by programmers who obsessed about the “user experience.” (Then-Chief Operating Officer Bob Pittman set the limits for users’ experience with his often-repeated story about how he introduced AOL to his mother in Tupelo, Miss., by assuring her it was as easy to use as a toaster.) Second, the service often turned up its nose at interesting content from the outside because its creators wouldn’t — or couldn’t — pay the extortionate carriage fees that AOL demanded. Third, because content was geared to slow-speed dial-up users, AOL programmers couldn’t venture into video or other offerings for users with high-speed access.
Aol.com was supposed to throw off those shackles and offer compelling new content, according to Case’s strategy. But it never happened. Case let AOL retreat from his ambitious plans and the company failed to develop high-speed content and platforms that it could test with its potential new audience that was exploding on the Internet. Aol.com wound up becoming nothing much more than a docking station where AOL members could read their e-mail at work and where non-members could sign up for AOL’s Instant Messenger service, or try to join the invitation-only ICQ social network. In this vacuum, Yahoo! and Microsoft very quickly were able to race ahead, especially when they added e-mail to their free offerings. In 1997, audience and content on the Internet reached their critical inflection point — but the aol.com domain remained an empty quarter.
So why didn’t Case follow through on his pledge to let AOL grow beyond its walled garden? I believe the answer is embedded in the company’s need to continue producing solid quarterly financial results that would keep the stock going up — results based on membership, not on edgy content. In 1997, subscriptions for the main service were pumping more than $1.5 billion annually in AOL’s coffers — 80 percent of all revenue. Case and his top decision-makers did not want to tamper with the Wall Street-pleasing metric of subscriber growth — even though they made public gestures toward a revenue model more balanced by advertising. (We now know, of course, that a lot of that advertising was a phantom).
In one sense, you couldn’t blame the Case team. AOL’s numbers seemed invincible in 1997 — a third of all Internet users in the U.S. were AOL members at that time. Throw in the existing placeholder site, aol.com, and AOL controlled 50 percent of Internet traffic. If you had an office on the fifth floor of AOL’s headquarters in Dulles, Va., you could imagine you were on top of the Internet world — that you were not just a mass medium but the mass medium.
But even in 1997 the paradigm was beginning to change: People started going to the free and open Internet faster than they were signing up for AOL, mostly through the click-ability of Microsoft’s Internet Explorer. And, while AOL programmers continued to spoonfeed the service’s members — a slide show was considered cutting edge — millions of users, newbies as well as sophisticates, merrily roamed the Web without AOL’s training wheels. While AOL had more than doubled its membership base between 1997 and 2000, the total number of Internet users had more than tripled. And the gap has continued to widen since.
By the time Case merged AOL with Time Warner, it was probably already too late to liberate AOL from its self-imposed shackles. Millions of new Web users were shunning AOL, while current AOL members were defecting, wondering why they were paying for pre-chewed content when they could get the real thing, in far greater variety and quantity, elsewhere. Many defectors were those who went to faster Internet connections — and were not about to accept AOL’s dial-up content. AOL could have kept many of them in the family with an aol.com rich with video and other content geared for high-speed users. But in 2000, when Case could still call the shots, aol.com tailed far behind its competitors. More than ever, AOL clung to subscriber revenue to bolster stock price, even though member growth continued to be outstripped by overall growth of the Internet. Of course, the rest is history — with Yahoo! and Google bounding far ahead of AOL since Case’s failure to follow through on his 1997 pledge.
Last year, aol.com finally began to show some of its potential. It is now loaded with high-speed content and even offers e-mail. But despite millions of dollars spent promoting the new site, traffic numbers are not encouraging. Since its relaunch in June 2005, aol.com’s daily reach has hovered around 25,000, peaking at 34,000 per million. But that’s puny compared to No. 1 Yahoo!, whose reach per million continues to hit around the 300,000 mark. Aol.com is also way behind Yahoo on average page views — 4.0 per user versus 16.5 for Yahoo!, which means that Yahoo! has considerably more inventory to make available to advertisers.
Aol.com will surely improve its numbers when the site starts to benefit from its new and improved partnership with Google and shows off its souped-up video search. But aol.com’s competitors regularly roll out new features to prevent their eyeballs from straying.
Steve Case’s failure to “liberate” AOL in 1997 continues to cast a long shadow across the Internet landscape. It’s a narrow shadow, but wide enough to keep aol.com in the dark.
