How An Internet Pioneer AOL Ended Up Losing It All

Vinod Pandey


What would describe as the most dominant internet company of all time? Maybe Google, Facebook, or Amazon? Well, in the modern age, that’s probably true, but zooming out, you could argue that AOL was the most dominant internet company of all time. 

How An Internet Pioneer AOL Ended Up Losing It All

Way back in 1999, they boasted a market cap of $200 billion when the internet was in its infancy and dollars were actually worth something. They did everything from email and online news to chat and connecting to the internet itself. And AOL wasn’t just a zombie company that was held up by the dotcom bubble either. 

They had massive users and market share to back up their sky-high valuation. In fact, at the peak, over 35 million people were using AOL to connect to the internet. For perspective, only 248 million users were using the internet in total at the time. 

So, AOL controlled over 10% of the entire internet and they were expanding into every service you think of. But, their time at the top didn’t last forever. Very soon, they would start bleeding market share to younger internet companies like MySpace, Friendster, Facebook, Google, and so on. And pretty soon, all of their fundamentals would begin a harsh decline. 

By 2008, for example, their revenue was consistently falling by over 25% every single year. At that rate, you’re entire business is pretty much gone in 4 years and that’s exactly what happened. By the early 2010s, AOL was a shell of its former self that was simply cashing in on its former glory. 

Eventually, in 2015, Verizon would go on to buy the entirety of AOL for just $4.4 billion, or 98% lower than its peak valuation. And things have only gotten even worse since then. 

In 2021, a private equity firm named Apollo would buy out the entirety of Verizon Media for $5 billion which included Yahoo, TechCrunch, AOL, Engadget, and RYOT. So, it’s safe to say that AOL has officially lost 99% of their valuation and that’s not even accounting for inflation. So, what in the world happened to AOL? 


Taking a look back, the story of AOL takes us all the way back to 1983 when the internet was basically just a concept. As such, AOL didn’t quite start off as an internet company but they were always flirting with the idea. 

You see, they actually started off as a video game company called Control Video Corporation or CVC, but this wasn’t actually a video game company. CVC offered a service called GameLine for the Atari 2600 which allowed users to download games on demand. 

Users were able to hook up a modem to their phone line, after which they just had to pay $1 for every game they wanted to rent. CVC was basically trying to introduce cloud gaming way back in ‘83. 

Big companies like Sony, Microsoft, and Google are struggling to do this in 2023, so unsurprisingly, the venture wasn’t all that successful back in 1983, but this simply gives you a glimpse as to how forward-thinking AOL initially was. 

Anyway, by 1985, CVC would reach the brink of bankruptcy and a couple of investors would buy the company for pennies on the dollar and start a new company called Quantum Computer Services which was once again way ahead of time. 

At first glance, they were just an online services company that allowed people to get access to things like the news and stock prices from their computers. However, it’s how they went about providing this access that was ingenious. 

As you would guess, the internet was extremely slow back in the day. In fact, the best you could hope for was just 2400 bits per second. As such, making the most of the little data that could be passed through this connection was essential and this is where Quantum excelled. 

While much of the competition was passing through fully rendered graphics to the user’s computer, Quantum would only send the bits and pieces needed to render these graphics, and it was up to the user’s computer to put together the visual. 

This minor change, which is a no-brainer today, set Quantum leagues ahead of the competition. Users didn’t quite know why but online services offered by Quantum were way faster and convenient to use despite having the same slow internet. 

As such, many were more than happy to pay $10/month to get access to an online encyclopedia, news, stock quotes, 15,000 public domain Commodore programs, the Comp U store, and American Airlines’ travel booking site. And that was just what you got with the basic plan. 

For an additional 8 cents per minute, you could get access to chat rooms, email, online games, classified ads, online classes, and events. While this was a phenomenal service for the time, the internet market simply wasn’t all that big. 

The entire internet itself only had an estimated total of 500,000 users. So, it’s not like Quantum could really grow all that big, but it wasn’t the size of CVC or Quantum that made them a notable part of AOL’s history, rather, it was their innovative spirit. 

It turns out that AOL was much more willing to push the boundaries and try new things when the company was constantly fighting to survive largely because they had no other choice. 

When those were the options, AOL had an easy time picking the former, but once they actually achieved scale and success, that mindset would be thrown out the window which brings us into the creation of AOL proper. 

Also Read:

What Happened To Browser Toolbars?

Exploring Walmart's Flower Selection: Types, Prices, and Options

What Happened To The Once-massive Telecom Company Sprint

Why LinkedIn may be the most powerful social media platform

How Did Europe Fall So Far Behind In Technology


Moving into the 1990s, the internet would see a massive influx of users largely thanks to web browsers which made accessing and navigating the internet far easier for the average person. This in turn led to an explosion in online services and games with whom Quantum continued to compete, but they also saw a far larger opportunity. 

Instead of trying to dig for gold on the internet like they had been doing since 83, why not just sell the shovels for the internet? Aka, get into the internet service provider game and that’s exactly what they would do. 

They would rebrand the company as AOL or America Online and introduce their famous AOL disks in 1993. These are often described as being the internet on a disk, but that’s not exactly what these disks did. 

Rather, you still needed a modem to actually connect to the internet, but the software on the disk simply made the process of connecting to the internet using the modem far easier, especially for people who had never done it before. 

Also, the disks usually came with a set number of free internet hours, usually somewhere between 70 and 100 hours. So, these disks basically became the perfect starter kit for people who wanted to try out the internet. And did I mention that the disks were free? 

AOL basically sent millions of these disks to people’s homes hoping that they would give it a shot and become addicted which is exactly what happened. A whopping 10% of people who received these disks would give it a shot, which is insane for a cold mailing strategy. 

Eventually, AOL would switch from floppy disks to CDs, and these guys basically single-handedly popularized CDs. In fact, 50% of all the CDs produced worldwide were from AOL, and they were onboarding a new user every 6 seconds. 

And this trend was simply thrown into overdrive when AOL switched from a pay-per-hour model to a flat monthly fee of $20. I do want to note that this wasn’t exactly a profitable move, as the company was burning money, but it did make AOL the ubiquitous internet company. 

And by the mid-1990s, AOL would begin cashing in on this ubiquity across the board. In 1996, they purchased a search engine called Excite which they would eventually brand as AOL search. They would also purchase one of the largest browsers of the time, Netscape, for $4.2 billion. 

They of course also had their own instant messenger, email, news outlet, video platform, and Yellow Pages just like every other internet company. And to their credit, a lot of these services were actually super successful too. 

Their email service for example was the world’s largest in 1997 with 9 million users. However, there was one key difference between AOL’s original products like CVC and Quantum, and these products. These products were nothing special. 

They weren’t ahead of their time, they didn’t offer anything unique, and there was really nothing notable about it. The only reason that they were so popular was because AOL as a whole was so popular. 

It’s the same that happened with Internet Explorer. Internet Explorer was never popular because it was good. It was popular because Windows was so popular. At least, AOL’s products were still keeping up with the times throughout the late 90s as it wasn’t long until they would fall behind the times. 


Likely the single biggest event that changed the trajectory of AOL was the turn of the century which perfectly coincided with the biggest deal in internet history. A merger between AOL and Time Warner in a deal worth $350 billion. 

Accounting for inflation, that’s the same as a $623 billion merger today. On paper, this deal looked like a genius idea as it was combining the world’s largest media conglomerate with the world’s largest internet provider. 

And if executed correctly, this could’ve been an excellent deal that turned the company into a trillion-dollar giant. However, that’s not exactly how things played out. You see, AOL had just played an entire decade on easy mode. Everything they touched turned to gold, so they were overconfident as ever. 

And as for Time Warner? Well, Time Warner is basically as entrenched and slow-moving as a company gets. Combine this with the irrational investor confidence during the dot-com bubble, and the new company was naturally inclined to think that they had already won the internet. 

So, they would sit back and relax as their biggest threat continued to grow: broadband internet. Broadband internet was already a thing in the 1990s, but it wasn’t all that popular because it was quite expensive compared to the dial-up internet that you could get from AOL. 

With that being said though, Broadband did offer much better internet quality. People simply didn’t care for that extra quality in the 90s but they did in the 2000s. For a company like AOL and Time Warner, making the pivot from dial-up to broadband would’ve been a piece of cake, but instead, they would let competitors like AT&T and Comcast eat their lunch. 

Combine this with the dotcom burst and in 2002, the new company would post a loss of wait for it $98.7 billion. To this day, this is the worst annual loss in corporate history ever of all time period. By this point, AOL was naturally starting to get nervous. 

Fortunately, they still had their massive slew of internet products, messengers, emails, and news outlets right? Well, it turns out that these products had no differentiating advantage and a little startup named Google had been rapidly chipping away at their market share for years at that point. 

Within a blink of an eye, you all of a sudden no longer needed AOL to access the internet or use the internet. Worse, people started associating AOL with the slow and old Time Warner, and they far preferred to use services from young startups with slogans like “Don’t Be Evil”. 

By this point, it was basically all but over, and all that was left was the painful decline. In 2009, Time Warner would spin off AOL into its own company. 

Since then, AOL has mainly stayed afloat by selling run-of-the-mill products like anti-virus to their dwindling user base and a running few successful acquisitions which primarily consist of the media publications TechCrunch and Engadget. 

Wrapping Up

Ironically, the brands of these subsidiaries are far more relevant today than AOL itself. It just goes to show that just because you’re ahead of your time at one point doesn’t mean that you’ll always stay ahead of your time. And that is what happened to AOL: the company that threw away everything.

Post a Comment


Post a Comment (0)