Is AOL Finally Crashing and Burning?

An anonymous reader writes "AOL's disastrous quarterly report showed cash from continuing operations was down 44% from a year ago (adjusted operating income was down 37%), as it continues a rocky transition from monthly subscription fees to advertising. (Their quarterly report also notes 'the cessation of large-scale access subscriber acquisition campaigns' — investor-speak for the fact that AOL will finally stop mass mailings of free trial accounts.) Unfortunately, AOL's advertising business 'did even worse. Its revenues declined by $110 million... every single segment is down.' AOL has already lost 86% of the 30 million subscribers it reported in 2001 — down to just 4.3 million — but advertising hasn't yet filled the gap (possibly because many AOL ads had been displayed to the users AOL no longer has). But at least, as one technology blogger notes, AOL has finally released a mobile application, 'in the new definition of "late to the party."'"

Comments

Re:What does AOL even do?

[ratsouffle]

I think the issue here is that AOL are essentially in the same market segment as ZOMBO.COM, which does everything AOL does, better.

Re:What would you do?

[couchslug]

"So what would you do if you were running AOL?"

It's too late. The relentless determination to suck despite years of criticism is irreversible.

The brand is tainted, sell it off.

There goes the Eternal September

[krzysz00]

With AOL dead, one of the primary causes of the Eternal September is over. (People won't be geting their Usenet through AOL anymore).

Re:They still mail CDs ??

[amiga3D]

I used them as coasters. New ones came regularly in the mail. I always thought that AOL stood for American Organization of Lamers.

Re:What would you do?

[DevConcepts]

A friend on AOL... Sure.... Actually I have a friend I have been trying to get off of AOHell for years. All you can do is try to teach them about the "Real" internet and introduce them to Firefox or Chrome and whatever email program of they don't want to use web based email. Also remember to secure their computer real good because AOL has been doing the babysitting for them and they will be in the wild wild intertubes!

Re:What would you do?

[tomhath]

FTFA:

Tim Armstrong, Chairman and Chief Executive Officer. "Although we have much more significant goals for the future of AOL, we are pleased with this quarter's internal and external trends."

According to the report they went from a $90M net profit last year to a $1B net loss this year. I'm glad the CEO is pleased, but If I worked there I'd be looking for another job.

Dominant Businesses

[amiga3D]

These companies that reign on top for years like AOL always seem to be almost unable to change and adapt to new times and technology. They get locked in to their success to the point that they stagnate. When change happens they just get left behind.

Re:Dominant Businesses

[drinkypoo]

The problem was they were raking it in too thick to want to change until it was too late.

Acting like you are secure as #1 is the quickest way to end up in the #2 spot. It's either incompetence, or someone relevant had something to gain by not keeping AOL going.

Re:Dominant Businesses

[Pharmboy]

If you are making $200,000 with $1,000,000 bonuses, you have a vested interest in things NOT changing. Many businesses have higher up employees who get bonuses greater than their base salary, and those guys don't want to sacrifice short term profits for long term stability. "Why should I get my bonus cut in half due to reinvestment just to make the business stronger in 10 years, when I likely won't be here?". The bank industry is another example of how this screws up a business. Managers are more worried about their quarterly reports than the long term stability of the company.

This is the prime example of the disadvantage of publicly owned companies. While it is easier to get capital for expansion, privately held companies tend to have longer term thinking. Dominos pizza didn't go public until 2004, and did an excellent job of expanding before then. Chick-fil-A is privately held and the 2nd largest chicken restaurant chain the in US and wildly profitable due to a long term approach to business. There are other examples as well. AOL is the counterexample, where they focused on short term gains and had little (or poorly thought out) long term planning.

Re:Dominant Businesses

[Bigjeff5]

In-N-Out Burger is another one you've probably never heard of if you haven't been to the southwest. Easily the most popular fast food joint in several large cities, yet there are only a handful of them because it isn't just privately owned, it's family owned. No franchising, and probably never will be any.

They treat their employees like gold too. Have you ever heard of a fast food place that pays its managers $100,000 a year to start? Assistant managers start at a little under $60,000. Part-time workers start at $10 an hour.

If you've never been, and you happen to be in Arizon, California, or Nevada, you should definitely hit up an In-N-Out Burger.

Re:Dominant Businesses

[Jay L]

I think the companies that *don't* reign on top are also unable to adapt. Most companies do one thing well (at most) - ever - and if that one thing happens to intersect over time with what the market wants, they're successful for as long as that intersection lasts.

Re:Dominant Businesses

[16K Ram Pack]

You're not wrong. I worked for a business that got taken over by a private equity company. They came down and basically explained their 5 year strategy. Years 1 and 2, they weren't going to make any money. It was restructuring, investing in technology and getting the business good, and then making money in years 3-5. I was there for 18 months and they stuck to it.

Re:Dominant Businesses

[Macrat]

In-N-Out Burger is what McDonalds was originally. A simple burger joint that excelled at their small menu.

here in northern California, you will often see the street backed up with cars waiting to get to the drive through. Very popular.

Re:They still mail CDs ??

[arb phd slp]

The CDs often came in very nice cases. I painted some and used them whenever I wanted to hide a burned CD in a geocache.

Re:There goes the Eternal September

[sharkey]

Me too!








;)
I kid, I kid.

You've Got Fail!

[jewishbaconzombies]

I'm surprised they lasted this long - particularly after Warner ditched them. It's a testament to the power of people unwilling to change their email addresses mostly I bet.

email accounts

[newdsfornerds]

If they went under, what would happen to the millions of aol email accounts still in use? Oh, the humanity! The only time I am ever aware that aol still exists is when my 79 year-old father forwards email to me that was sent to him from one of his elderly, aol-using friends.

Re:email accounts

[Killer Orca]

No need to knock their free email accounts. Their spam filtering may not be near as good as Google's, but they are the only other free email service to offer IMAP for accounts. Only reason I have an account still.

All companies come and go.

[Anonymous Coward]

Facebook, Twitter, Wikipedia, Tumblr and all the current web 2.5 (2.0 was years ago) will be replaced by the next "Big Thing", and AOL might come back as the you nostalgia you lose ISP. In 2020 you will see AOL CDs with new FirefAOL 7.0 with 1 Quadrillion free nanoseconds nanogigabit internet access for your MacOS Liger and Windows 9ista.

Also Linux will still have 0.8% market share.

Re:AO who?

[alienunknown]

AOL own a lot of websites. For example, AOL owns the blogs Engadget and Joystiq which are both quite popular.

About freaking time

[HangingChad]

... as it continues a rocky transition from monthly subscription fees to advertising.

Maybe they should go into chat rooms and ask for help...with the CAPS lock on, of course.

Re:They still mail CDs ??

[MBGMorden]

The CD's? No, I pretty much hated them. The floppies though? Now those were cool. AOL ensured that no one ever had to actually buy their own disks.

Re:What would you do?

[Elbereth]

Cash in on the Web 2.0 fad. Hire a hundred bloggers to blog all day long. Turn AOL.com into a huge social network, rivaling Facebook. Everyone with an AOL account is automatically added to the social network, with all privacy defaults set to "disallow all but my friends". Advertise on television that AOL is now web 2.0, more private than Facebook, and hiring bloggers.

Do they still own the Netscape brand? If so, I'd resurrect it. Make a bootable Linux CD-ROM that has Firefox on it, connects to AOL, and uses KDE as a desktop. Put them in computer stores and gaming stores. Sell them for $1 or make them free.

They could still make it through this.

Future generations won't understand...

[garyisabusyguy]

just how funny a list of 101 uses for AOL disks really is.
http://www.joke-archives.com/aol/aoldisk.html

Damn shame, kids won't have anything to shove under the front legs of a pinball machine

Re:Future generations won't understand...

[Tassach]

The conference tables in one of the AOL buildings (CC1) are actually covered with shards of broken-up AOL CD's embedded in plastic.

It was pretty cool, actually.

Re:Future generations won't understand...

[asdf7890]

I recommend giving http://lab.arc90.com/experiments/readability/ a go. It can turn some of the most eye-burning of pages into a simple block of readable content.

See patch.com

[dino213b]

"This year, AOL is spending $50 million to expand Patch nationally to hundreds of sites by the end of the year."

http://www.boston.com/business/technology/articles/2010/08/05/with_patch_aol_offers_challenge_to_local_news/?page=full

AOL is going hyperlocal - going to give local newspapers a run for their money.

Re:They still mail CDs ??

[Anne_Nonymous]

>> I used them as coasters.

Yeah, they fit perfectly in the cupholder on my machine.

Re:What would you do?

[tgd]

I've heard there are some good tractor trailer training schools out there ...

They're the 'A' in A.I.M.

[JSBiff]

You know, they're the people that run those "AIM" servers that you can access with Pidgin, Trillian, etc.

Re:They're the 'A' in A.I.M.

[Anonymous Coward]

Does anybody still use AIM? Wow. That's like using ICQ.

Yes. In the world outside of your ten ultra-chic geek friends using XMPP, the vast bulk of people still use AIM.

Trust me, it's a much larger world out here. You'd be afraid of it.

Re:There goes the Eternal September

[tecker]

(People won't be geting their Usenet through AOL anymore).

They already dont. If Eternal September hasn't ended by now then Usenet is screwed. According to Wikipedia article on eternal september:

On February 9, 2005, AOL discontinued newsgroup access through its service, which it announced on January 25, 2005.

Best start hunting the source of infection again.

One way they have stayed afloat.

[605dave]

I just noticed that AOL has appeared on my credit card bill yet again. I have not used the service since the 90s, but I am still forced to call and cancel every two years are so. I have downloaded my transactions for years, and can call up all payments. It's bizarre, after two years, all of sudden a charge will start appearing again. I wonder how many of their subscribers have been repeated scammed like this.

Re:One way they have stayed afloat.

[fuzzyfuzzyfungus]

Historically, cancelling AOL has often involved canceling your credit card...

Re:What would you do?

[Anonymous Coward]

The CEO will probably be paid a large bonus whether he drives the company out of existence...

If the CEO is able to drive AOL out of existence, he deserves to get paid a large bonus for such a tremendous public service.

I worked Customer Retention there in 2002. Read on

[Pezbian]

Brings back memories. People would call up, wait on hold for half an hour or more and end up on a call with me or any other SAVES rep:

*ping* (female phone voice) AOL. Saves. [connect]
Me: Thank you for calling America Online, this is Pezbian. How can I help you have an even better online experience today?
Luser: Cancel my account. (yeah. So original.)
What I'd say while playing Solitaire on the computer: I'm sorry to hear things aren't going well for you. Let's get started.
What I'd be thinking: Okay so what are you? Computer-stupid, no longer in need of training wheels, sick of overpaying or just trying to make a stand?

From there, it was a matter of talking them into staying. I probably gave away a lifetime worth of free service months in two month blocks during the few months I was there. Did it matter? No, and I'll explain why later. If you were a jerk, you got transferred or hung up on. We were taught never to hang up on lusers, but disconnecting the cord from the back of the phone didn't count as a hangup. I did it a couple dozen times when I'd get cursed at. There were often logs from previous support reps in the Merlin system regarding customer behavior so I pretty well knew who was going to be trouble and who was going to get free stuff.

At the end of the call, there were sometimes these "Special Member Benefits" where lusers would hear a speil for something else. I got $1.25 if they would just listen to it. Some people were wise. "Do you get a bonus if I just listen to it?" "Yes I do." "Well since you've helped me so much, you're going to get that bonus." Schweet. While I was there, the SMB was a Sprint long distance deal. Yeah, for a landline. Remember those? I probably got $200 a month just off of those transfers.

Pay: $8 an hour plus bonuses. Bonuses... boy howdy... 80+% of your income. I didn't believe it until I got my first 90-day long-term retention check. That's correct. Your long-term retention bonus was on a 90 day scale. Not a year. Why? Ultimately, it was because the revenue generated by each user for AOL was $125 a month. That's on top of the $23.90 a month they were charging for you to be their lab rat.

I wasn't delusional enough to expect the crazy bonus checks to last forever since the dollars for banner ads (no matter how attention-whoring/seizure-inducing) boom was already crashing hard and popups/pop-unders were starting to become the norm.

The funniest thing about working there was the special event days they'd have where Warner Bros movies that were still in theaters were screened in the call center during work hours. The techs and everyone but SAVES would be watching while SAVES saw it as a distraction from the big money. Some reps were making six figures a year. I kid you not. You were on a tiered scale where you were paid for saves per month and the more you got, the more each one paid you. Those who were making that kind of money had little time for anything else, however. 12-16 hour days non-stop. One lady hadn't had a day off in three months and slept at work sometimes, but she did make $125,000 a year this way.

In the middle of my time there, an "All Hands" meeting was called where everyone in the callcenter went to a big reception center and got put through a big dog and pony show. It was mostly about a new SAVES pay scale change that was more focused on quantity than quality. This wasn't beneficial to my style. I was all about long term. I didn't care about the average $1.50 24-hour or pissant $.50 30-day retention bonuses. I was all about the 90-day kind that paid like $9 each if I remember correctly. I was going to take a big hit on my paychecks to the extent that it just wasn't worth keeping that job.

It's worth mentioning that, during the Q&A portion, a butthurt tech dared ask when the tech support people were going to be paid like Saves reps. The suit on stage snickered slightly while the question was met with groans and laughter from Saves goons like myself. The

Re:What would you do?

[Tassach]

Cash in on the Web 2.0 fad. Hire a hundred bloggers to blog all day long. Turn AOL.com into a huge social network, rivaling Facebook

They tried this, multiple times. And failed, multiple times. I know, I was deeply involved with the effort. First came AIMPages.com. Millions of dollars spent, negligible uptake. Then they tried building another social network based off of the old Member Directory. That never even made it out the door. Then they bought Bebo for about 5x what it was worth and only succeeded in driving away those customers it already had.

There are a lot of really smart people at AOL down in the trenches -- some of the most knowledgeable DBAs, SAs, and developers I've worked with in 20 years I met at AOL. Most of the smart ones fled or got laid off but I still know a few of the good ones who are still there, and they are the only reason anything at AOL works at all.

Executive leadership is lacking, to say the least, and they cripple every product by trying to emulate every feature a competitor has without understanding that "actually working" and "not being slow as crap" are essential features for any product. If AOL was building houses, you'd have 3 dozen managers obsessing over having marble counters, oak cabinets, and Italian tile floors, and ignoring the workers who were telling them that the roof leaked, the plumbing backed up, and the foundation was cracked.

Netscape? They pretty well killed that brand off years ago. They bought Netscape for the traffic going to the portal site, which is why they created the Mozilla foundation and dropped the browser code like a hot potato. And the traffic that they paid so much to get? 90% of it was gone within a year of the takeover. They made a half-assed attempt to resurrect it as a Digg-style social networking site, but that took off like a lead balloon.

Re:AOL: non-hereditary expression of stupidity?

[Pezbian]

Elsewhere I mention my time as a retention rep for AOL. Relevant to both that experience and your post, here's a story:

When I started working for AOL, I already had Internet service through Comcast. While training, I asked if they seriously expected me to get a landline just so I could dial up via 56k modem when I had a 3mbps line already. Nope.

They had the option where you could (oh wow...) run AOL over your existing connection for the same $23.90 (at the time) price. That's right. Run my free AOL employee account over my $50 a month broadband line. While they had AOL Boardband available at the time, it wasn't available in my area for some reason, meaning I couldn't get in on the free bundle as an employee.

Dogfooding is nice, in theory, but I couldn't bring myself to use AOL even just for practice. The service felt condescending, really.

Re:AO who?

[Bigjeff5]

Indeed, you need about 20 people to run those websites, at most, and maybe $2 million a year, tops. I don't expect ad revenue to be more than about $3 million - $4 million a year, which is enough for a couple people to get rich.

They still have about 5,000 employees, though.

That's 4,980 too many to be supported by their website revenues, and is why they are losing billions with a 'b' dollars every year.

Oh how times change.

[RyuuzakiTetsuya]

I just realized I'm entirely dependent on AIM. My favorite gadget blog is Engadget. Owned by AOL.

I don't want AOL to die. :(.

Re:Gosh!

[afabbro]

I'd switch over to Compuserve if they still used PDP-10s

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Re:What would you do?

[JDeane]

Screw it I'm going to web 11.0!!! I want 3D Live Streaming Video Chat, 3D video games, 3D Pictures and 3D Porn!!!

lol Someday soon half of the crap I just posted will be true...

Re:What would you do?

[Etcetera]

Oh man, AIM. Let me tell you, seeing AIM running on someone's computer allows you to instantaneously gauge them as a total ignoramus. Very handy.

If you must have "instant messaging" then go with XMPP. Meanwhile anyone who's anyone is still using IRC, forever the greatest and only text chat for netizens.

Well, the point is... having an AIM account, not necessarily using the AIM client. But then, a true geek recognizes there are different tools for different jobs :) FTR I use both IRC and AIM (and MSN, and ICQ)... and I hate integrated clients.