Information Technology Reference
In-Depth Information
Kimsey's place as CEO and Kimsey becoming chairman. AOL held its initial public offer-
ing in March 1992 and raised $66 million, shares initially selling for $1.64.
At that time, the two leaders in providing online services were Prodigy (to be discussed
shortly) and, as previously noted, CompuServe. Post-IPO, Case invested aggressively in
the expansion of AOL. He developed a beautiful user interface, set subscription prices
well below those of his competition, and filled the mailboxes of subscribers to consumer-
based computer-related publications with diskettes providing AOL connection software.
The software came with a free trial offer. This smart marketing resulted in rapid growth.
By the end of 1993 the company had more than 600,000 subscribers.
AOL found itself the subject of two unfriendly takeover attempts in 1993. The first
came from Microsoft cofounder Paul Allen (now departed from that firm), the other from
Microsoft. Allen eventually acquired a 24.9 percent interest in AOL but was denied a seat
on the board. Case successfully fought off both attempts, leaving Allen to pursue other ven-
tures and Microsoft to eventually create its own online service, the Microsoft Network.
At the time of its 2001 merger with Time Warner, AOL's capitalization sat at a $240 bil-
lion high. But it was all downhill from there, largely - of course - due to the rise of the open
Internet and Web as a borderless online universe. AOL's subscriber base saw no quarterly
growth from 2002 onward.
As of 2011, things seem even bleaker. "In the two years since he took over [AOL Chair-
man Tim] Armstrong has succeeded in spinning off AOL from its former parent, Time
Warner, ending a ten-year union that's widely viewed as one of the most disastrous in cor-
porate history," wrote journalist Tim Bercovici in a spring 2011 edition of
Forbes
. "But
that doesn't mean it has left the past behind. The company is still reliant on its rapidly
declining Internet-access business, which charges 3.6 million subscribers (down from 4.1
million last September) an average $18 a month and was responsible, directly or indirec-
tly, for more than 40% of the company's $551 million first-quarter revenues. An aggress-
ive plan to rebrand AOL as a provider of original content has yet to pay off in meaningful
traffic or advertising growth. Patch, a network of 800-plus local news websites that Arm-
strong helped to found and then had AOL acquire in 2009, is blowing through $40 million
a quarter without generating meaningful revenue. Armstrong promises AOL's display-ad-
vertising business, the focus of his strategy, will soon be growing at industry-average rates
of around 20% per year, but so far the best he's clocked is a meager 4%." At the same time,
few analysts see AOL's recent $315 million acquisition of the
Huffington Post
as a game-
changer.
Another player in the subscription online service market was Prodigy, founded in 1984
by Trintex, a joint venture between CBS, IBM and Sears. CBS left the partnership in 1986.
Formally launched in 1988 after four years of R&D, by 1990 the Prodigy service hosted
465,000 users, second only to CompuServe (600,000).
