The Decline and Fall of AOL
With deep humility Steve Case said, “This merger will launch the next Internet revolution.”
I remember watching these guys in disbelief. They were talking content, synergy, big numbers—gibberish. They were talking about themselves to themselves and to their investors.
What about me?
“The prospect doesn’t give a damn about you, your company or your product,” said Seattle guru Bob Hacker. “All that matter is, ‘What’s in it for me?’ “
“Always listen to WIIFM,” is the old rule: “What’s In It For Me?”
As I listened to these two puffed-up popinjays, I could not grasp WIIFM.
Not one of its 19,000 employees—nor its myriad ad agencies—could explain the benefits of the AOL Time Warner merger to me, a subscriber to Time and to AOL.
I mean, talk to me about the elegance of the one-line address, Internet access, great for the kids, ease of use, vast array of services for one low monthly cost …
The merger was a catastrophe. Investors took a $100 billion loss in 2002.
Things got worse. In 2005 AOL settled fraud charges with the SEC for overstating its advertising revenues. The penalty: $300 million. That same year, the head of AOL human resources pleaded guilty for $100,000 wire fraud. And six executives were indicted for conspiracy.
As computer users became more and more sophisticated, they realized they could get Internet access for free rather that pay AOL $200+ a year. Yahoo! and Google were eating AOL’s lunch.
AOL has tanked. Now down to 18+ million members and huge marketing costs, it is keeping unhappy members by making the quitting process so difficult and unpleasant that it’s easier to keep paying them money. AOL paid $1.25 million in fines to settle a fight with New York Attorney General Eliot Spitzer over its policy of continuing to bill members who had quit. But it ignored the consent agreement and allowed retention specialists to wreak havoc on the membership.