The Decline and Fall of AOL
The trashing of a money machine and a great brandJuly 2006 By Denny Hatch
In the NewsTime Warner to reveal AOL cost-cutting plan
Time Warner said on Tuesday that it would unveil the new business strategy for its AOL division on August 2, after it releases its quarterly financial results. The company also said that recent reports about its plans for AOL included incomplete or “largely erroneous” financial information, and urged investors not to draw conclusions before the presentation. Righting AOL is a top priority for Richard Parsons, Time Warner’s chief executive, and Jeff Bewkes, the company president who is his presumptive successor, as they try to prove to investors that they can shepherd the media group into the digital age and revive its slumping share price.
—Joshua Chaffin in New York, Financial Times (FT.com), July 12, 2006
When I was growing up on Long Island, the mailman frequently would deliver an envelope addressed as follows:
Mr. Alden Hatch
Cedarhurst, New York
The letter could come from anywhere in the world and in just two lines—six words—reach my father out of more than 2 billion people on the planet. This never ceased to amaze me.
Every son hopes to outdo the father. So when I became a member of AOL, I had a one-line address: firstname.lastname@example.org.
Think of it! In this horrendously complex world with 6.5 billion people, I am reachable with one line—17 characters and a dot—from anyplace on earth and outer space (if an astronaut cared to e-mail me) instantly, 24/7.
How AOL could screw up this incredible brand I find as amazing as my one-line address.
The Genius of Janice Brandt
In 1993, Internet access was essentially a three-horse race. The text-heavy CompuServe was owned by the tax accounting people H&R Block and had about a million members. So did the cartoon-oriented Prodigy, a joint venture among CBS, Sears and IBM. The longshot was America Online (AOL), with its elegant Graphical User Interface (GUI), chat rooms and exclusive community-building techniques, that had been taken public the prior year by founder Steve Case; he had just under 250,000 members and was doing about $40 million a year in revenue. One advantage Case had over the competition: The name, America Online, says what the service is; Prodigy and CompuServe could be just about anything.
Enter Jan Brandt, a direct marketing wizard with a solid grounding in continuity marketing that helped take AOL to more than 22 million members. She did it working hundred-hour weeks in which she mounted between 2,000 and 3,000 marketing tests a year. Her strategy was so wildly successful that it enabled AOL to acquire the vast Time Warner empire as well as its early rival, CompuServe. In my opinion, Janice Brandt is one of the most influential women in American business—right up there with Martha Stewart and Oprah—and she did it in just seven years by putting her personal life on hold.
I don’t think to this day that Steve Case understands what Jan Brandt accomplished for him. My bet is that he assumed AOL was so good that it would have sold itself, with or without Brandt.
Takeaway Points to Consider:* If your business model has been a cash elephant for years, think long and hard about summarily changing it.
* ”The sale begins when the customer says ‘yes’.”
—Bill Christensen, freelance copywriter
* By that, Christensen means it’s imperative to continually resell the customer on the benefits of doing business with you.
* Is every contact between you and your customers a delight for the customer? If not, make it so.
* On June 29, 2006, I wrote a story about Zale Corp., a company that changed its business model without testing and with disastrous results. The title of the piece: “Before Changing Your Business Model, Consult a Direct Marketer.” The only thing that will save AOL is to call Janice Brandt out of retirement and put her in charge.
* It is virtually impossible to reach a live person at AOL. If you want help, prepare to get lost in auto-reply jail. Be accessible.
* Do you know how your customer service people are treating your customers—really? Do you have secret shoppers continually pushing them and reporting back to HQ? If not, make it so.
* A happy customer will tell three people. A dissatisfied customer will tell the world. For an exercise in vitriol, Google “AOL sucks.”
* If you have achieved a marketing breakthrough do not blab to the press how smart you are. A competitor smarter than you are will leave you in his dust. Instead, just shut up and rake in the loot.