Time Warner to AOL: It’s Not Me, It’s You

Time Warner appears finally to be quitting the AOL business:

Time Warner unveiled plans Thursday to spin off AOL as an independent company, an end to the massive media marriage formed in 2001.

“We believe that a separation will be the best outcome for both Time Warner and AOL,” said Time Warner chief executive Jeff Bewkes, in a prepared statement.

The 2001 merger between AOL and Time Warner was applauded at the time as a visionary attempt to meld old media with new media. But synergies between the two never materialized.

The whole “synergy” argument always makes me giggle, because it’s been my long-held opinion that the real reason that AOL and Time Warner ever got together in the first place was that back at the turn of the century, AOL head Steve Case realized things were going to get bad, and that if AOL were to survive, it would need a host organism to feed off of during the lean years. And look, there was Time Warner, full of rich, life-giving nutrients. Done and done. If synergy were to happen, so much the better. But in the meantime, AOL would survive. And it did. So in this respect, well done, Steve Case.

The other thing I find amusing in this is that people seem to forget that it was actually AOL who bought Time Warner, not the other way around. Survival strategy or not, it’s an interesting thing for the purchasing organization to be spun off from the company it bought. But this is what I strongly suspect Steve Case didn’t account for, which is that the executive bench strength and organizational memory of Time Warner was much stronger than it was at AOL (which changed — and changes — its executive lineup as often as some people change socks). In other words, the host organism was easily latched onto, but then exhibited some impressive antibodies. Steve Case was gone as AOL Time Warner Chairman in January 2003, the company dumped the “AOL” part from their official title and that was pretty much that in the “who’s the boss?” sweepstakes.

Bear in mind I’m not a disinterested observer here; I was employed at AOL for two years in the mid-90s (i.e., its heyday, when it was seen as the universe-eating monster Google is today — which is a cautionary tale for Google) and I was a contractor and consultant for them up until the last day of 2007. I have generally very positive feelings about the company. Yes, AOL did lay me off once, but it turned out to be one of the best things that ever happened to me, and they did keep me on as a consultant for more money and less work, so I can hardly complain about that. Aside from that a number of people we met there continue to be close friends. So, in all, AOL’s a big part of my life.

Which is why I wish it well being spun off and continuing its life out there without Time Warner stepping on its head. What would be nice would be for AOL to get back a bit of its mid-90s “what the hell, let’s just do this and see if it works” zing; it’s never going to be that company again, but then, none of us are who we used to be. It doesn’t mean that who we are now isn’t interesting (or in some ways, better). Regardless, I see AOL as a long-term survivor; it’s not for nothing that I call it out in The Android’s Dream as “Earth’s oldest and largest continually active network.” Even if I do have it owned by Quaker Oats at the time. Hey, whatever works.

33 thoughts on “Time Warner to AOL: It’s Not Me, It’s You

  1. Ah, yes, those were the good ol’ days… internet access charged by the minute, with a dial-up access point that required a long-distance phone call. Talk about learning about the web the expensive way.

  2. Interesting AOL Story. We used to play poker using the ‘free minutes’ CDs from AOL as the different denominations of chips. It was lots of fun and AOL provided us with a constant supply of free chips.

  3. I was one of the four people working in Roadrunner tech support back in 2000-2001 in South Carolina and yeah, the writing was on the wall back then when the rate of new AOL subs started dropping like a rock at the same time that RR was going from 3,000 subs to over 30k in the span of a few months. The gossip mill was going back then about dropping AOL and just continuing on as Time Warner RoadRunner. ‘Course around that time AOL debuted its incredibly crummy AOL broadband that still required a “dial up” step where you loaded the AOL client before you were able to use the net. Way to miss the point guys, one of broadband’s big draws was the always-on bit.

  4. I know that theoretically, given its success, there were people out there that actually used AOL. Those people we sort of made fun of back then for not understanding how to get anywhere on the actual internet and instead needed their online content distilled and could only navigate through simple “keywords” but I’m not sure anyone really fesses up to that now. Mostly you just hear stories (see above) about what uses people found for the never ending supply of free CDs. Personally? I was a teacher back in the day, and we’d use them for kindergarten art projects (making robots, etc.)

  5. Those were the good old days. My company was one of the content providers for AOL. When AOL went flatrate, we reaped huge benefits. I’ll never say that that part sucked.

    But when AOL decided they wanted us to completely gut-rip our game and screw the customers who had leveled up characters for over five years, we said, “You don’t really get this whole online community thing, do you?”

    Ultimately, as with you, it saved us: forced us to go to the web, establish our own billing procedure, make our way sans AOL. But man oh man, those first few months were some scary times (which involve me also being temporarily laid off when we briefly ran out of mad AOL moneys).

    I don’t get the same bad vibes from Google, oddly enough. Google seems more friendly somehow. Maybe it’s because Google is still innovating (or identifying companies that are innovating and gulping them up). I like to believe that if Google were AOL, they wouldn’t have told us to gut our content and customer base, and instead found a better solution, but that may be me just being idealistic.

    Anyway, long live AOL. It got my Mom on the Internets, and for a while it funded my company. Thanks, AOL!

  6. I think much of the merger had to with the tech bubble. AOL had to know that they were overpriced and would go down eventually – though I doubt that they knew how much. It’s like trying to beat inflation. If the value of your money is going to go down a great deal, it’s a good idea to convert it to something that won’t decline.

    Time-Warner was AOL’s version of investing in precious metals.

  7. The big difference between Google and AOL is that Google seems to realize they need to innovate in order to maintain their relevance. What new product or idea has AOL given us lately? A new version of AIM? They’re like a modern-day buggy whip manufacturer.

    The only people I can see needing AOL are those too broke to afford broadband and those too timid to visit the Intertubes without training wheels…

  8. Who bought who is a financial fiction in a lot of transactions — it’s often done to simplify (read reduce) tax obligations, and not necessarily who gets to run the new behemoth.

    I was part of G.D. Searle & Co. in the 80’s when it was bought by Monsanto. By the time Pharmacia and Upjohn merged with them in 1999 to become (Upjohn-less) Pharmacia, Monsanto had spun off major businesses (Nutrasweet, non-agricultural chemicals and fibers businesses, etc.), and the Pharmacia/Searle merger was conditional on being able to spin out Monsanto as a separate company. Then Pfizer ate everything left.

    So the AOL/TW mitosis is just more of the same.

  9. I hated, hated, HATED AOL’s software. I still get nightmarish flashbacks when I think about it. If AOL dies, I will not be sad. They gave me enough headaches to last a lifetime.

  10. I think you’re right about the Steve Case thing. He knew his company’s stock was wildly bubble-inflated and he’d better purchase something huge with it before the stock market wised up. I can’t imagine why the Time-Warner board went along with it.

    There was a good synergy to be had if they had been clever enough to have it. As I understood it at the time, AOL was interested in Time-Warner for its cable business, which it intended to use to move AOL to broadband. Instead, the combined corporation promoted services like Road Runner and kept AOL as a dial-up provider. Not very bright. AOL had name recognition, brand loyalty, and a huge customer base, they should have supported and promoted it better.

  11. “I can’t imagine why the Time-Warner board went along with it.”

    Maybe they liked word synergy?

  12. “I was employed at AOL for two years in the mid-90s (i.e., its heyday, when it was seen as the universe-eating monster Google is today — which is a cautionary tale for Google) ”

    So, are you saying here that Google shouldn’t hire you? Or at the very least, if they do, they shouldn’t lay you off?

  13. Heather:

    Actually, when I was doing an appearance at Google a couple of years ago, I don’t think my handlers were at all amused by my comment that Google in 2007 very much reminded me of AOL in 1997.

  14. There are still remote corners of the country that don’t have easy broadband access, so people still use AOL (and MSN, to a lesser extent) dialup. Also, some folks who have managed to get broadband in recent years have simply kept their accounts at those two places because they don’t want to (or don’t know how to) switch.

    What this has meant, however, is that the vast majority of people who still have these accounts are Luddite hicks. Which explains why every AOL political poll comes down heavily on the side of ignorant douchebags, and why MSN’s message boards are full of said douchery, too.

    It may be bigoted of me, in a way, but I still cringe when I see an email addy that ends in one of those domains, because it almost certainly means “Person who hasn’t a clue about the modern world.”

    And I say this as someone who has worked for MSN, and thus knows very well how stupid their user base can be. MSN’s content–especially their original stuff–is actually really good these days, and it’s kind of sad that they don’t get nearly as much attention and respect for that as they should, but they just keep getting dragged down by the barnacle-encrusted rusting hulk of their former dialup user base.

  15. AOL does have some good offerings, many of which are not really branded as AOL or just aren’t widely known. Mapquest, Truveo, Engadget, Moviefone, Joystiq, GameDaily, MusicNow, and mobile technologies, to name some. It’s not all great, and the company has serious issues. But there IS potential, and the employees want to see it become a more innovative and agile company. And now, they have a CEO with that same vision. So we’ll see what happens.

    But the dumb CDs? They will never return. Current employees consider that like a shadow of something sinister and evil that once covered them in years past, that they are scrambling to get free from.

  16. >… Earth’s oldest and largest continually active network.

    Yeah, I realize it’s fiction, and see your point about survival skillz. BUT, what are the Internet and Usenet, potted plants?

  17. @17 Lori:

    You make a great point (and one I’d forgotten). I think the problem is that there is no common branding umbrella for these sites unless you actually visit them. No one says AOL Mapquest; everyone says Google Calendar. Or knows what the “g” stands for in Gmail.

    I wish ‘em best. My experience is over a decade old, and hopefully they’ve learned from their mistakes.

  18. The AOL CDs were useful for coasters and skeets, but I loved getting the 3.5″ floppies in the mail. I’d reformat them and use them for storage; I think I backed up my TIE Fighter save games on one, and used a few more to save school projects on when going back and forth between school and home.

  19. Lori @17: All the products you listed were acquired by AOL, and they all pretty much had their own following before being bought. Their acquisition had more to do with increasing traffic to AOL than with giving those products higher visibility.

    I realize that Google has also acquired some of their technology (such as Postini), but they seem to be focused more on in-house product development than buying eyeballs.

  20. I’m a charter member of AOL (from back in the days when it was bundled with PC/GEOS). In recent years, I’ve only used it for the Radio@AOL feature, but since that has been sluiced over to CBS Radio, there isn’t really much of a reason for me to continue with AOL any more.

  21. I found AOL useful when I was moving regularly between the US, Holland, the UK and France a few years ago – all I needed was a local phone no. And also for letting my mother piggyback an account.

  22. When I was working at the corporate level for a major company both buying and selling assets we had a saying: “Synergy only exists in the eye of the buyer” :)

    – Mark

  23. it’s an interesting thing for the purchasing organization to be spun off from the company it bought…

    Oh, I saw it happen around me, in the transportation industry. Roughly speaking, the parent company adopted a child and had two more children. The children got together and threw the parent out of the house, and then kicked out the adopted child, handing him over to a foster parent who changed his name and did everything possible to erase all memory of his existance.

  24. I’m strongly with those upthread who, even at the time, saw AOL’s acquisition of Time-Warner as being a relatively* brilliant move by AOL to use its absurdly overstated book value to acquire something of more real and more lasting value. Time-Warner itself may not have as much real value as was then believed, but AOL was a total bubble, and its management cashed out that bubble at about its peak.

    The whole “synergy” argument was always patent nonsense, and I always hoped that no-one in AOL management believed a word of it – though I suspected that some of the Time-Warner management actually might.

    .

    * “relatively” because Time-Warner was itself probably overvalued. But they couldn’t really trade the book value for cash, and by going with a media company they could blind the rubes with their “synergy” patter, so it was still probably a good choice. Besides, they were media executives themselves, so buying a bigger media company made some sense if they wanted to keep their jobs.

  25. Tal@16–It may be bigoted of me, in a way, but I still cringe when I see an email addy that ends in one of those domains, because it almost certainly means “Person who hasn’t a clue about the modern world.”

    People thought much the same thing when AOL first crashed the Internet party. Usenet couldn’t handle the rising tide of AOL users the way it would normally assimilate the periodic influx of college freshmen with shiny new email accounts through their universities. The rise of AOL is still referred to in Internet lore as The September That Never Ended.

  26. I know that theoretically, given its success, there were people out there that actually used AOL. Those people we sort of made fun of back then for not understanding how to get anywhere on the actual internet and instead needed their online content distilled and could only navigate through simple “keywords” but I’m not sure anyone really fesses up to that now.

    AOL served an important purpose in the mid-1990s era, not really so long ago, when personal computer operating systems didn’t yet come bundled with a TCP/IP stack, PPP dialup software and a suite of Internet applications. Even if you were a complete geek who wanted to install all this stuff yourself, you were faced with the chicken-and-egg problem that a lot of it was most readily available on the Internet, but you couldn’t go on the Internet until you had it. But since AOL was throwing discs of their own software suite left and right, you could at least get a trial AOL account to get yourself started.

  27. Matt McIrvin @29: Yup, and that’s why I had an AOL account for all of a day, back in 1997.

    Unfortunately, the university website from which I was trying to download the software that I actually _wanted_ to use had a two-minute timeout on the login screen, and after a half-hour of trying I had to conclude that AOL’s connection speed was simply too laggy for me to successfully log into it — by the time the page loaded enough to click submit and the submission packet made its way back to the server, the two minutes were already well up.

    So, back to station-wagon-network it was.

  28. I <3 Tim Armstrong. I'm looking forward to an AOL doing interesting things again, regardless of the level of hatin' on it gets from people.

  29. Y’all sure know how to make a fella feel bad. I still have the AOL account I signed up for in 1992 when I got my first Mac, a Classic II. It came with an AOL disk and it was one of the first programs I installed. I had also gotten a modem (2400 baud), so I was “online” in moments. Yes, yes, I know- AOL in 2 bit black & white was lame, but it was worth it then. I kept upgrading my modems over the years- 9600bps, 14.4kbps, 28.8, 33.6, 56k- had ‘em all. And used ‘em to get to AOL, and read USENET, download games & utils for my Macs, which over time progressed from that Classic II to a Mac IIvx, which was replaced by a Mac Clone PowerComputing PowerPC150. I was nowhere near the cutting edge, but I was ONLINE, man.

    I always thought that AOL/Time Warner “merger” was the most ludicrous idea of the whole dotcom era.
    Was I wrong?
    I think not. [caveat: If you're Steve Case, then yes, I'm wrong.]

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