AOL, also known as America Online, wasn’t the first online service. But it became the biggest and most popular one. For many people of a certain age, AOL was their first experience with a modem, or with the Internet. Let’s take a look back at AOL history and how its legacy affects things even today.
AOL long had a reputation as a place where inexperienced, unsophisticated computer users hung out, but the company had a long streak of innovation and was ahead of its time in many regards. I’ll bet you had no idea the history of America Online begins way back in 1983. And you may also be surprised to hear the company still exists, though in a different form, even today.
Control Video Corporation, 1983
The company that became AOL was founded in 1983 by Bill von Meister, as Control Video Corporation. Control Video Corporation had the forward-thinking idea to distribute Atari 2600 video games over the phone. Through its service, Gameline, you rented games from its library of 76 titles for $1. You can almost think of Control Video as the original digital distribution publisher, a forerunner to Steam and Netflix. One of its first employees was Steve Case. Gameline cost $49.95 with a $15 setup fee, and gave you free unlimited rentals on your birthday.
Downloading Atari cartridges over 1980s dialup sounds painfully slow, but the modem ran at 1200 bits per second. At that rate, a 4-kilobyte Atari game could download in about 35 seconds.
The problem is that Control Video Corporation’s timing couldn’t have possibly been worse. The Atari 2600 was the most popular video console of the time, but its popularity tanked in 1983 as consumers flocked to inexpensive home computers like the Commodore 64. Those who stuck with their Atari consoles weren’t inclined to rent titles for a dollar when they could buy the cartridges out of closeout bins for $3.
Control Video Corporation went bust a year later.
Rebirth as Quantum Computer Services
Control Video reorganized in May 1985 and shifted its focus from the most popular game console to the most popular home computer of its time. It licensed technology from a struggling online service called PlayNET, which it deployed and enhanced as a service called Quantum Link, or Q-Link.
Commodore made sense, as it was selling three million computers a year at the time, and it also offered inexpensive dialup modems. A Commodore 64, disk drive, and modem cost nearly $600 in 1985, but that was less than many competing computers at the time, such as the IBM PCjr and Coleco Adam. With other computers, the modem alone could cost $300. Commodore bundled a Q-Link disk with its modems and with some models of its computers, much like 90s computers bundled an AOL disk or pre-loaded AOL on their hard drives.
Q-Link offered file downloads, message boards, e-mail, and online games via a colorful, menu-driven user interface. The experience was primitive by today’s standards, but very Internet-like. Quantum’s most ambitious project was a joint venture with Lucasfilm called Habitat, the first multiplayer online game. Habitat was extremely highly publicized and ran from 1986 to 1988 but never left beta testing due to its high cost. A simplified version called Club Caribe succeeded it. The popular Lucasfilm games Maniac Mansion and Zak McKracken and the Alien Mindbenders took much of their inspiration from Habitat.
Although inexpensive for its time, Q-Link was expensive by modern standards. A subscription cost $19.95 a month and included one hour of service. Additional time was six cents per minute, later increased to eight cents per minute. Commodore 64 sales tailed off dramatically starting in 1987, but Q-Link remained in operation until early 1995.
Services for other computers
Quantum didn’t ignore other computers of its time, and this allowed it to survive even as the Commodore 64’s popularity started waning. The company’s continued ability to reinvent itself is why AOL history didn’t end with the 1980s.
Quantum and Apple created a Q-Link like service called Apple Link for Apple IIgs and Macintosh computers in 1986, and in 1988 it launched PC Link, a service for IBM-compatible PCs that it developed with Tandy, the parent company of Radio Shack. The partnership with Apple ended in 1989, but the partnership with Tandy soon proved pivotal.
It’s easy to forget now, but in the late 1980s, the Tandy 1000 was one of the most popular IBM-compatible PCs in the home. Partnering with Tandy helped set the stage for the next, most crucial phase of AOL history.
All of these online services worked essentially the same way. With no public Internet available yet, you loaded a client, provided by AOL or whatever it called itself at the time. This client dialed into one of AOL’s big, powerful computers using a modem and a phone line. The client also provided a user interface to interact with the computer and other users. The experience was similar in many regards to using Facebook.
History of America Online
The AOL name started appearing in 1989, but the first AOL-branded DOS client appeared in 1991, building on PC Link but with a better, flashier graphical interface it licensed from a company called Geoworks. This was an important milestone in AOL history, and continued the pattern of licensing and repurposing technology from other companies.
Windows was quickly gaining popularity at this time, so AOL for Windows followed in 1992. AOL offered downloads, online shopping, e-mail and chat just like its predecessors. But with PCs gaining faster processors and more memory in the early 1990s, AOL was able to enhance the service rather quickly. Its ease of use, relatively low cost, and relative lack of restrictions compared to its competitors, especially Prodigy, made it grow in popularity.
AOL started phasing in Internet access in 1993, when it added access to Usenet newsgroups. It followed with dialup Internet access in 1995, and by 1997, half of all home Internet subscribers used AOL.
AOL dropped hourly billing in December 1996, which led to a huge increase in use and busy signals. In effect, by underestimating demand, AOL DDoSed itself. Steve Case, by now CEO, made commercials reassuring subscribers they were working around the clock to increase capacity to meet demand. Once it solved the capacity issues, AOL became a juggernaut, and in 1998, it bought its biggest rival, Compuserve.
One of the hallmarks of AOL in the 90s was its aggressive distribution of its client on disk and CD form. It would bundle the client with computers, bundle it into magazines, and mail it to anyone they suspected owned a computer.
I never subscribed to AOL when it was known as AOL, but I lost count of how many AOL floppies and CDs I once owned. Getting the floppies in the mail was nice because you could erase them and reuse them. Repurposing the CDs was harder, because you only need so many drink coasters.
The blue chip dot-com
In the late 1990s, as technology stocks boomed in value, analysts praised AOL as the only blue-chip stock in the dot-com market. Unlike other dot-com stocks at the time, AOL had a revenue stream and was turning high profits. However, the analysts underestimated the effects broadband Internet would have on AOL’s business model.
AOL delivered a staggering return of 11,616% to shareholders in the 1990s, which may be the biggest highlight in AOL history. But AOL lost $92 billion of its value in 2000. I invested in stocks heavily in the late 1990s. My then-financial adviser was bullish on AOL. I wasn’t, but deferred to his judgment. I lost about half that investment, which was one of my motivations for learning how to invest without an adviser.
Merger with Time Warner
In January 2000, AOL announced plans to merge with content provider Time Warner, closing the deal a year later. This is perhaps the most pivotal moment in AOL history. The combined company, AOL Time Warner, is widely panned today as one of the worst mergers of all time.
But like AOL’s 1980s failures, this was more of a problem of timing. Delivering multimedia content over dialup connections was impractical, so AOL wasn’t really able to gain much synergy between its content business and its Internet business. But other companies later did similar mergers with a greater deal of success, notably, the merger between Comcast and NBC.
The other problem was that by the time the merger finished, broadband connections over DSL and cable modems quickly gained popularity. AOL’s old dialup business model was a dead end, and the struggles for AOL to reinvent itself dragged down the whole company. But in hindsight, the Time Warner business provided revenue streams that kept AOL from turning into Yahoo.
AOL retained a surprising number of customers throughout the 2000s, though it could no longer boast anything close to 50 percent market share. It repositioned itself as a web-based portal so it could retain subscribers as they moved to broadband service and eventually AOL dropped its standalone client. Its revenue stopped growing in 2005. AOL chat gave way to AOL Instant Messenger, which remained popular well into the 2000s. Some of its users had no meaningful recollection of dialup Internet.
In 2009, Time Warner spun off AOL as an independent company, in effect unwinding the 2001 merger. Nearly a decade later, in 2018, another large Internet provider, AT&T, purchased Time Warner.
AOL the digital media company
Post-2009, AOL rebranded itself as a provider of digital media and advertising. It went on an acquisitions spree, acquiring properties such as Huffington Post and Techcrunch. In 2013, AOL experienced its first growth in revenue in eight years. AOL’s glory days were long gone at this point, but this is a stage of AOL history many people don’t realize even exists.
As of 2015, AOL still had two million dialup customers. That’a surprising number, but that dwindling customer base wasn’t going to keep the business afloat on its own.
Acquisition by Verizon and AOL’s ultimate legacy
AOL history more or less ended in 2015, when Internet provider Verizon purchased AOL for $4.4 billion. Verizon merged AOL with Yahoo as part of a subsidiary named Oath. As a Verizon subsidiary, AOL’s prominence is much lower than it once was, but it can be a surprise to some people that the company still exists in any form.
Today AOL is a legacy business within a much larger company and a shadow of its former self. AOL’s predecessors did a lot to make the 1980s more interesting, and to drive innovation in the 1990s. Historically, AOL is a very important company, even though it faded into the night and became the butt of jokes and a common example of an outdated business model.
Today AOL resembles the Hall of Famer who continues playing well past the age of 40 in a bench role, a shadow of what once was. If it feels like AOL never got a proper goodbye, it’s partly because it somehow never really left.