BCS071806_ReadersResponse
July 2006 By Denny Hatch
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Readers Respond to “The Decline and Fall of AOL,” published July 13, 2006.
I want to share a couple of items to the history of AOL’s success. Jan Brandt left Field Publications as Advertising Director just at the time that Primedia, then K-III Communications, bought Field and included it with the Direct Marketing Group, of which Newbridge Communications (formerly Macmillan Book Clubs) was the anchor. Gryphon Editions was a division of Newbridge. I think the Field acquisition occurred in 1991. I also think Jan went to AOL directly from Field. Newfield, as it was renamed, slowly began to deteriorate. In 1993 K-III’s senior management, headed by Bill Reilly, directed Newbridge to review the situation, and I was directed to look at the direct marketing results and interview the top marketing people. I found the businesses were overall in pretty bad shape. Newfield had been doing everything they could to make their numbers, which is mandatory for a highly leveraged company. However, doing so papered over some developing problems. I found the staff was very capable. Generally, they were aggressive direct marketers, significantly more aggressive than we at Newbridge were. For whatever reason, K-III decided a housecleaning was in order. The Newfield people became demoralized and several very good people, chief among them Dan McLoughlin (I may have misspelled his last name)went down to work for Jan. You are right that these folks worked incredibly long hours, and they became incredibly wealthy for their hard work. In addition, I learned at the DMA in New Orleans in 1997 (I think) that AOL was going to completely abandon the hourly rate structure for a flat monthly fee. There had been numerous complaints and even legal challenges to the hourly billing. This billing change and the aggressive marketing of Jan, Dan and their colleagues really sent AOL into the stratosphere. The other thing that AOL had going for it was that it was the best ISP available for dial-up. AOL has always been very easy to use, computer savvy. I think the Time-Warner/AOL merger really took AOL’s eye off the ball in terms of being a premier Internet company. At K-III and Newbridge we used to refer to synergy as the “S” word. It was never to be used. At the time of the merger, the stock market had highly valued AOL because of its growth curve. However, the seeds of its decline were already germinating, just as Newfield’s decline had not been readily apparent. There was tremendous gamesmanship in terms of making the numbers. Bob Pittman’s nickname was Bob “Pitchman.” Frankly, I’m surprised that AOL’s subscriber base has remained as high as it is. There is no reason that someone with high-speed Internet access has AOL. My reason for continuing is that my small, New Jersey, customer service office strongly prefers AOL to the Verizon mailbox. Also, many of our customers know our AOL address. AOL needs to make a fundamental change to keep high-speed users. While permitting the service to be absolutely free is great for me, I think it will likely be the end of AOL as we know it. Is AOL better than Yahoo or MSN? No. I don’t think Jan or Dan or anyone can put this business together again. Time-Warner really needs to spin AOL off as a free-standing operation again, and maybe they can merge with someone like Google to bring them back up to speed.
I want to share a couple of items to the history of AOL’s success. Jan Brandt left Field Publications as Advertising Director just at the time that Primedia, then K-III Communications, bought Field and included it with the Direct Marketing Group, of which Newbridge Communications (formerly Macmillan Book Clubs) was the anchor. Gryphon Editions was a division of Newbridge. I think the Field acquisition occurred in 1991. I also think Jan went to AOL directly from Field. Newfield, as it was renamed, slowly began to deteriorate. In 1993 K-III’s senior management, headed by Bill Reilly, directed Newbridge to review the situation, and I was directed to look at the direct marketing results and interview the top marketing people. I found the businesses were overall in pretty bad shape. Newfield had been doing everything they could to make their numbers, which is mandatory for a highly leveraged company. However, doing so papered over some developing problems. I found the staff was very capable. Generally, they were aggressive direct marketers, significantly more aggressive than we at Newbridge were. For whatever reason, K-III decided a housecleaning was in order. The Newfield people became demoralized and several very good people, chief among them Dan McLoughlin (I may have misspelled his last name)went down to work for Jan. You are right that these folks worked incredibly long hours, and they became incredibly wealthy for their hard work. In addition, I learned at the DMA in New Orleans in 1997 (I think) that AOL was going to completely abandon the hourly rate structure for a flat monthly fee. There had been numerous complaints and even legal challenges to the hourly billing. This billing change and the aggressive marketing of Jan, Dan and their colleagues really sent AOL into the stratosphere. The other thing that AOL had going for it was that it was the best ISP available for dial-up. AOL has always been very easy to use, computer savvy. I think the Time-Warner/AOL merger really took AOL’s eye off the ball in terms of being a premier Internet company. At K-III and Newbridge we used to refer to synergy as the “S” word. It was never to be used. At the time of the merger, the stock market had highly valued AOL because of its growth curve. However, the seeds of its decline were already germinating, just as Newfield’s decline had not been readily apparent. There was tremendous gamesmanship in terms of making the numbers. Bob Pittman’s nickname was Bob “Pitchman.” Frankly, I’m surprised that AOL’s subscriber base has remained as high as it is. There is no reason that someone with high-speed Internet access has AOL. My reason for continuing is that my small, New Jersey, customer service office strongly prefers AOL to the Verizon mailbox. Also, many of our customers know our AOL address. AOL needs to make a fundamental change to keep high-speed users. While permitting the service to be absolutely free is great for me, I think it will likely be the end of AOL as we know it. Is AOL better than Yahoo or MSN? No. I don’t think Jan or Dan or anyone can put this business together again. Time-Warner really needs to spin AOL off as a free-standing operation again, and maybe they can merge with someone like Google to bring them back up to speed.
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