Twenty years ago America Online (AOL) was pretty much how most of us accessed the internet. It seemed like everyday we got AOL CDs in the mail, even if you already had AOL. For $19.99 per month you dialed on to the service and cruised the internet at 56 Kbps (yes, that is a “K”!). When we received a new email a male voice announced “you’ve got mail!” So exciting!!
In 1996, AOL made a deal with Microsoft to have AOL bundled with its Windows software. In 1997 AOL acquired Netscape, whose Navigator browser was used by over 90% of web surfers back then. By 2000 AOL was so huge they acquired Time Warner for $183 billion (yes that’s a “b”).
Things went down hill from there. From a high of 27 million subscribers in 2002 AOL was down to about 5 million at the end of the decade.
The synergies promised from the AOL/Time Warner merger were never realized and eventually Time Warner spun off AOL (the corporate equivalent of kicking your parents out of the house because they’re not pulling their own weight. But, it had to be done, for our own good.) AOL would somewhat diversify its business by evolving into a content provider. They acquired Huffington Post as well as Tech Crunch and Engadget. They also turned to advertising providing high quality video content for the web. They made some acquisitions like Advertising.com which enable their customers to target their advertising. In spite of their best efforts, AOL wasn’t the advertising juggernaut that Google is.
However, if you’re a telco like Verizon and in the midst of a price war declared by your smaller competitors, You have to think that content and advertising vehicles are an attractive means of alternative revenue streams. Sure customers can access the network cheaper but at least Verizon will have content and can generate advertising revenue. What can the smaller carriers provide with their lower rates (and lower margins)? Exactly. That’s why Verizon paid a 23% premium for AOL at $4.4 billion. 15 years ago, that would have been an unthinkable statement.