Not too long ago, much of the Internet industry didn’t even consider America Online, or its millions of subscribers, part of their fraternity. There were predictions that it would die as the Internet gained momentum.
“The sense was AOL was different from the Internet,” said Alan Meckler, head of Mecklermedia, which runs the Internet World trade show, a movable feast that most recently set up shop in New York.
How things change.
This year Meckler asked America Online Chairman Steve Case to give the opening speech at the New York show, where 600 Internet-related companies hawked their wares. The phenomenal growth of AOL, up from 300,000 subscribers in 1993, helped fuel Internet fever, and “we have been a key beneficiary of this,” Meckler said in introducing Case to an audience of several thousand.
A year ago, America Online was angering hordes of its subscribers–as well as the attorneys general of dozens of states–because customers who were signed up for unlimited access found themselves, instead, unable to connect to AOL’s overburdened network. America Online still consistently earns mediocre ratings from the cogniscenti. PC World magazine just named it the worst of 12 nationally available Internet service providers that it tested.
But the Dulles, Va., company has managed to solve many of its busy-signal problems, and added has nearly four million subscribers.
Its 10 million members make it by far the largest on-line service in the world.
And many of those members are dedicated denizens of the on-line space that gives them what they want and is easy to use.
After years of enormous “churn,” or subscriber turnover, “we joke that they now have more current users than former users,” said Internet analyst Gary Arlen of Arlen Communications.
“A year ago at this time, they were self-destructing,” said Kate Delhagen, senior consumer on-line analyst at Forrester Research Inc. “They have recovered from that, so I applaud them. And in fact, they have grown significantly,” Delhagen said.
At the Internet World show, AOL, in addition to announcing the gradual rollout of its new software, Version 4.0, unveiled plans that company officials hope will help the service grow even more. The company showed off an expansion of its World Wide Web site, which is making some AOL content available to non-members and where subscribers will now be able to check their e-mail without having to log on to AOL’s proprietary network.
Version 4.0 itself, though not radically new, does look and feel more like a Web browser, software specifically for navigating the Internet, rather than a proprietary service. In particular, there is now a space to type in keywords and Internet addresses, just like the Web-surfing screens on the popular Netscape Navigator and Microsoft Internet Explorer browsers.
Persistent complaints about AOL include the service’s slow response times, poor customer service and high-volume of junk e-mail, according to PC World. What AOL has going for it is ease of use and original content, the same magazine said.
Forrester Research’s Delhagen said AOL is likely to play to its strengths, and the stage is now set for the service “to really become a media company.” As such, AOL is expected to continue expanding its role as a producer of on-line content and services, while at the same time easing itself out of the pesky business of being the direct provider of on-line access, she said.
The expanding Web presence is one indication of that, Delhagen said. And so is the pending $1.2-billion three-way deal that will make America Online owner of the struggling No. 2 on-line service, CompuServe. Under the complex deal, both CompuServe’s and AOL’s access networks become the property of the Mississippi-based telecommunications company WorldCom Inc.
On “the big question” of where AOL goes in the future, “Steve Case and those guys have concluded that they could be the NBC or CBS of the Web,” said Tim Bajarin, on-line analyst and president of Creative Strategies Research.
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In that future, the analysts said, on-line services will make their money on advertising, rather than on subscriptions, and the service that delivers the most “eyeballs” to view those ads will, of course, be able to charge the most to advertisers.
“What they’re really building right now is brand identity and customer base,” Bajarin said. “So that as the TV and the Web meet, they are the place that integrates the two.”
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