Development and growth.
America Online (AOL), originally founded in 1985 by Steve Case as Quantum Computer Services, launched its first online service, Q-Link, in November. Steve was born in 1958 in Honolulu. By January 1986, Q-Link had a total of 10,000 users. In October 1991, Quantum changed its name to America Online, Inc. and successfully launched itself on the stock exchange on 19 March 1992.
By 1993, AOL was providing Internet access to about 500,000 members and offering its own online services. In 1994 membership had increased to over 1 million. At this time AOL also acquired various companies: Internet applications developer BookLink Technologies; Internet publishing tools developer NaviSoft and multimedia publishers Redgate Communications.
In 1995, AOL reached 4.5 million members and was rated “Best Consumer Online Service” by various IT magazines and the Information Industry Association. Share value rose from the initial $ 11.50 to over $ 58. 1995 also saw the launch of rival Microsoft Network (MSN) and a network war began.
In 1996 AOL services reached 7 million members and AOL France, AOL UK and AOL Canada were introduced. Growth continued in 1997 with the addition of AOL Japan. By this time e-mail services had reached enormous proportions, already outstripping the US Postal Service.
In 1998 AOL surpassed the 15 million member mark, formed a partnership with Sun Microsystems and acquired CompuServe and Netscape. AOL also continued to expand with the launch of AOL Australia.
By 1999 AOL had over 20 million members and acquired yet more companies: When Inc, MovieFone, Inc, Spinner.com, Winamp, SHOUTcast, Tegic Communications, and Digital Marketing Services Inc. It also moved into the high-speed DSL (Digital Subscriber Line) market. AOL also launched in Hong Kong and Brazil.
In 2000 AOL and Time Warner announced merger plans to create the world’s largest media company to be called AOL - Time Warner, a combination of AOL’s online services and Time Warner’s huge media and cable assets. Further growth continued as AOL moved into Argentina and Mexico. By now membership had increased to over 26 million and iAmaze, Quack.com, and MapQuest Inc. were acquired.
In 2001, as the AOL - Time Warner merger was completed, membership passed the 33 million mark. Alliances with Amazon.com, AT&T and eBay took place to speed development of online services including shopping, music and messaging.
In 2002, AOL’s customer base exceeded 34 million members using over 1 billion Internet hours per month. This year also saw the introduction of AOL for Small Business and Broadband
Burst bubble takes its toll
Despite all these apparent successes, the bursting of the late 1990s tech industry economic bubble had already radically effected the company’s combined worth. Huge amounts of advertising revenues from dot.com companies also disappeared and in 2002 the AOL element was considered to be the weakest part of the company.
Time Warner’s problems left them with a multi-billion dollar debt. A number of AOL – Time Warner assets were either closed or
But by the first quarter of 2003, the world’s largest media concern was able to announce a profit of $396 million. Turnover had also increased by 6% to $10 billion for the quarter. For the same period the previous year, the company had declared a record loss of over $54 billion following value adjustments and write-offs. AOL was the only division of Time Warner to have a reduction in turnover and profit. In the first quarter of 2003 AOL lost almost 300,000 of its over 26 million customers in the USA.
In 2004, Time Warner as a whole was able to record substantial profits and even the online division AOL increased its quarterly turnover by 2% to over $2 billion. However, the company was still losing customers in the USA and Europe.
But despite this, Time Warner has regained confidence and seems set to expand in all its
But that was back then. As it turned out, the company’s share price stagnated and investor criticism grew, spurred on by Carl Icahn, an activist shareholder and challenger of Time Warner’s management. In 2005, in a move to stem the tide, Time Warner CEO, Dick Parsons, announced that the company was considering buying back billions of dollars of its own stock and distributing more of its cable TV sector to shareholders. At the same time, he recognized that a balance had to be maintained in returning capital to shareholders to avoid creating too much debt and possibly leaving the company in a weak position should other opportunities arise.
It was also indicated that as a company priority, AOL would change from an Internet service provider to an advertising-driven Internet site ultimately providing growth opportunities.
Amidst all this, there was an unconfirmed report that Time Warner was considering an AOL - Microsoft Corporation MSN alliance.
Time will tell!