Speaker 1: Hey there, and welcome to Tech Stuff. I'm your host,
Speaker 1: Jonathan Strickland. I'm an executive producer and I Heeart Radio
Speaker 1: and I love all things tech. And there was a
Speaker 1: company that was so closely tied to the idea of
Speaker 1: connecting to the Internet that for some people it was
Speaker 1: synonymous with the Internet. It show. I'm talking about America
Speaker 1: Online or A O L, which is still around, but
Speaker 1: we're talking about the early days, and A O L
Speaker 1: grew into a giant force of a company. It was
Speaker 1: part of a merger that many people have described in
Speaker 1: the wake of that merger as being the worst deal
Speaker 1: in the history of tech mergers. So we're gonna look
Speaker 1: at the history of this company and where things are today.
Speaker 1: So in this episode will look specifically at how that
Speaker 1: company came to be and how it grew in the
Speaker 1: early years. Our story concerns several co founders. Frequently, if
Speaker 1: you look at stories about A O L, they'll talk
Speaker 1: about one of these co found unders over all the others.
Speaker 1: But they are very important, each and every one of them.
Speaker 1: So first we have William F. Von Meister, who founded
Speaker 1: a startup that would give birth to A O L.
Speaker 1: He would not be part of a o L itself,
Speaker 1: but a o L would grow out of a company
Speaker 1: that Maister had built, and the co founders would include
Speaker 1: three men who worked for this startup. UH. The startup
Speaker 1: was called Control Video Corporation. Those three men were Steve case,
Speaker 1: Mark Seraf and Jim Kimsey. William F. Von Meister was
Speaker 1: born in New York City. He his father had worked
Speaker 1: for the Zeppelin Company, infamous for being the company that
Speaker 1: would build the Hindenburg airship, the one that burst into
Speaker 1: flame and gave birth to the OH the Humanity Line.
Speaker 1: Von Meister was born on February twenty, nineteen two. He
Speaker 1: attended private schools and he went to Georgetown University, but
Speaker 1: he never graduated. Despite that, he was able to enroll
Speaker 1: in the master's degree program for business over at American University,
Speaker 1: and upon graduating, he founded many startups, and one of
Speaker 1: those was a tech company called Control Video Corporation, which
Speaker 1: I'll get to in just a moment, but first let's
Speaker 1: talk about some of these other founders. James Verlin Kimsey
Speaker 1: was born on September nineteen thirty nine. That would make
Speaker 1: him the oldest of the co founders who would create
Speaker 1: a o l He also attended, but did not graduate
Speaker 1: from Georgetown University, so he and Meister had that in common.
Speaker 1: He completed his education at West Point Academy. However, he
Speaker 1: became an airborne ranger, in fact a decorated one. He
Speaker 1: served three combat tours, two of which were in Vietnam,
Speaker 1: and after the war he began purchasing or opening bars
Speaker 1: and restaurants in the Washington, d c. Area. Became a
Speaker 1: very successful businessman, and he was brought over to Control
Speaker 1: Video Corporation to serve as a manufacturing consultant during some
Speaker 1: troubled times. Control Video Corporation did not have a long history,
Speaker 1: but it's certainly had a colorful one. Mark Saraf who
Speaker 1: was one of the other co founders. He was born
Speaker 1: on May five, ninety eight in Austin, Texas. He attended
Speaker 1: the University of Texas. At Austin, he earned degrees in
Speaker 1: computer science and mathematics, and then he would go on
Speaker 1: to enroll in graduate studies at m I T and
Speaker 1: he earned a master's degree in electrical engineering and computer science.
Speaker 1: In nineteen seventy four, he took a job at Telenet
Speaker 1: Communications Corporation, which in nineteen seventy five would become the
Speaker 1: first packet switched network available to the general public. You
Speaker 1: can think of it as one of the early backbones
Speaker 1: of the Internet. So he was in early, early on
Speaker 1: on the days of the Internet, before most people even
Speaker 1: knew what such a thing was, decades before they knew
Speaker 1: about it, in fact, and this was in the era
Speaker 1: when the protocols for data transmission across the Internet we're
Speaker 1: still being hammered out. Sarah would work for several tech
Speaker 1: companies over the next few years, eventually moving over to
Speaker 1: Control Video Corporation. Steve Case was born in Honolulu, Hawaii,
Speaker 1: in nineteen fifty eight. Steve and his brother Dan were
Speaker 1: entrepreneurial lee minded even at a young age. There's stories
Speaker 1: about him and his brother operating a little juice stand
Speaker 1: in Hawaii or selling greeting cards or seeds door to
Speaker 1: door as children. Steve would attend Williams College in the
Speaker 1: late seventies and early eighties. He would graduate in nineteen
Speaker 1: eighty one with a degree in political science. After graduation,
Speaker 1: Steve worked in the marketing department of Procter and Gamble,
Speaker 1: and he later went and worked for Pepsi Coo, specifically
Speaker 1: working as a head of marketing over at Pizza Hut,
Speaker 1: or at least an executive of marketing over at Pizza Hut.
Speaker 1: But I've to that his brother Dan introduced him to
Speaker 1: the founders of Control Video Corporation. Over at C E. S.
Speaker 1: Steve landed a gig with Control Video Corporation, which was
Speaker 1: doing something really interesting, a really interesting business model that
Speaker 1: would actually set the stage for America Online many years later. Now,
Speaker 1: another element I need to mention before I get into
Speaker 1: what Control Video Corporation was doing was a book that
Speaker 1: Steve Case had read when he was a college student.
Speaker 1: He thinks it was sometime around nineteen seventy nine. Is
Speaker 1: a book that was written by a guy named Alvin Toffler,
Speaker 1: and it's called The Third Wave. In that book, Toffler
Speaker 1: describes a world in which computers would form a new
Speaker 1: communication platform, a new revolution, a technological revolution akin to
Speaker 1: the Industrial revolution, and it would allow for new digitally
Speaker 1: oriented communities. Essentially, he was talking about the sort of
Speaker 1: thing we would see in various Internet communities like forums
Speaker 1: and things. That Case did not have an engineering background
Speaker 1: or a programming background, but he thought this idea was
Speaker 1: really compelling and it would become an important part of
Speaker 1: his vision once he joined this company. So we now
Speaker 1: know our major players, which really comes down to Steve Case,
Speaker 1: Jim Kimsey, and Mark. Seraf von Meister is important, but
Speaker 1: he was not part of the trio that would go
Speaker 1: on to found the company that becomes a O L.
Speaker 1: So what the heck did this Control Video Corporation do? Well?
Speaker 1: I didn't know very much about this when I started
Speaker 1: my research for this, which is funny to me because
Speaker 1: I've talked about Atari a lot, and their their business
Speaker 1: was deeply tied to Atari. And yet somehow I had
Speaker 1: never come across this, or if I had, I had
Speaker 1: forgotten about it. Control Video Corporation had created a product
Speaker 1: called game Line for the AD, and again I had
Speaker 1: never heard of this thing. Game Line was a cartridge,
Speaker 1: a very large, misshapen cartridge. It didn't look like the
Speaker 1: video game cartridges you would typically get if you wanted
Speaker 1: to play a game of Pac Man or Pitfall. But
Speaker 1: you would plug this cartridge into a t and it
Speaker 1: would extend far out of it because it was so big,
Speaker 1: and it had a port in it in which you
Speaker 1: could plug a phone line, an old hard lined phone
Speaker 1: connection to so This cartridge was part modem and part
Speaker 1: storage device. Uh so you would plug it through the
Speaker 1: normal cartridge port. It also had a battery that you
Speaker 1: had to plug in. They had to put a nine
Speaker 1: volt battery into this game line cartridge itself and then
Speaker 1: plug it into your phone line and at that point,
Speaker 1: your ATAR twenty could dial into the game Line service.
Speaker 1: Game Line customers would get an account. You would have
Speaker 1: a little form that would come or a card that
Speaker 1: would come with your game line cartridge that would include
Speaker 1: your personal identification number for that cartridge. If you logged
Speaker 1: into the service, you would get access to games that
Speaker 1: were available on that service, and then you could actually
Speaker 1: use the game line to download games to your cartridge
Speaker 1: to play on your AT twenty SID. So this was
Speaker 1: incredibly forward thinking. This was a service all the way
Speaker 1: back in three where you could download games to a console. Now,
Speaker 1: it took me a bit to get my mind wrapped
Speaker 1: around this because I'm familiar with the Atari twenty s.
Speaker 1: The cartridges for the atwy dred are ROMs. That means
Speaker 1: they're read only memory. You can't change them, at least
Speaker 1: not without physically changing the cartridge. The games themselves are
Speaker 1: hard coded in circuitry on the cartridges themselves. So the
Speaker 1: physical layout of the components on the cartridge are what
Speaker 1: make the game. It's not digital information stored in a
Speaker 1: volatile medium that you can erase and and right over. Instead,
Speaker 1: it's stuff that's physically etched in this cartridge. But the
Speaker 1: game line was a little different. It's still had a
Speaker 1: cartridge part that would plug into the console, but the
Speaker 1: information was stored on microchips. They could store these small
Speaker 1: amounts of information, not really big files. UH technology just
Speaker 1: wasn't there to hold a lot of information, But games
Speaker 1: were super small back in the early nine so this
Speaker 1: was not a problem. Also, you needed it to be
Speaker 1: small anyway, because these are games that are going to
Speaker 1: be transmitted over phone lines and the speed of a
Speaker 1: modem back in three was pretty slow. So the cartridge
Speaker 1: part of the game line would act as this interface
Speaker 1: between the game line and the UH. But the contents
Speaker 1: of the cartridge could be changed by wiping and overwriting
Speaker 1: the memory on those microchips. Pretty darn cool. Now, you
Speaker 1: would have a limited number of plays per title that
Speaker 1: you would essentially rent from game line, so you would
Speaker 1: have a membership fee, and there was a per download fee.
Speaker 1: It was just a dollar per game. So in a
Speaker 1: way you'd think, oh, well, that's not bad. I've just
Speaker 1: been a dollar and I get I get a copy
Speaker 1: of this game. But again, that copy wouldn't last forever.
Speaker 1: It would actually expire, and then if you wanted to
Speaker 1: play the game again, you would have to rent it again,
Speaker 1: and you would have to do that over and over
Speaker 1: until you lost interest in playing that particular game. I
Speaker 1: guess the company had plans to create similar services that
Speaker 1: would be operated over the phone, including banking services and
Speaker 1: news feed services, so you would get cartridges for those
Speaker 1: specific applications. You wouldn't use your game line to access
Speaker 1: it necessarily. You would have a news line cartridge that
Speaker 1: you would plug into your atari and then you'll be
Speaker 1: able to read the news. So sort of a proto
Speaker 1: internet service. Well, the idea was incredibly prescient. It was
Speaker 1: all the sort of services that we would associate with
Speaker 1: online service providers and later internet service and there were
Speaker 1: only a couple of online service provider like businesses in
Speaker 1: operation in the early eighties. Compu Serve, which we'll talk
Speaker 1: about as well in these episodes was one of them,
Speaker 1: but there weren't a lot, so this was pretty new stuff.
Speaker 1: Game Line didn't take off in a huge way, probably
Speaker 1: for quite a few reasons. One of the big ones
Speaker 1: was that the service was not able to secure licensing
Speaker 1: deals with the largest game publishers for the Atari twenty
Speaker 1: six hundred, so they weren't able to land deals with
Speaker 1: Atari or Activision, and that meant some of the biggest titles,
Speaker 1: the most popular titles for those game consoles or for
Speaker 1: the hundred specifically, just weren't available for game Line, so
Speaker 1: that made it difficult. There were more than seventy games
Speaker 1: available on game Line, but these were mostly you know,
Speaker 1: third or four tier games. Some of them were only
Speaker 1: available on game Line, but again, they weren't the big names.
Speaker 1: It wasn't the Pitfalls or the River Raids. Then the
Speaker 1: video game crash of nineteen eight three happened. This was
Speaker 1: the other reason game Line wasn't able to take off,
Speaker 1: because the entire industry crumbled. It imploded. It pretty much
Speaker 1: wiped out the Atar as a console. You didn't have
Speaker 1: anyone who could sell the darned things. Not to mention
Speaker 1: other competing video game consoles and companies, they all started
Speaker 1: to suffer. Anyone who was making a home video game
Speaker 1: console ine was in serious trouble. Or whose business depended
Speaker 1: upon making games for those consoles, they were in trouble too,
Speaker 1: So in nine four and eight five, the Control Video
Speaker 1: Corporation sort of fizzled. It disbanded, but then it coalesced
Speaker 1: into a new company. Now at this point, von Meister
Speaker 1: quietly bowed out. Once the Control Video Corporation was really
Speaker 1: starting to fall apart because of the video game industry
Speaker 1: going to pieces, he extracted himself. But the new business
Speaker 1: that formed out of the ashes of Control Video Corporation
Speaker 1: was called Quantum Computer Services. Only ten of the employees
Speaker 1: from Control Video Corporation would still have a job with
Speaker 1: this new company, So the CEO of Quantum Computer Services
Speaker 1: was Jim Kimsey. Mark Saraph would serve as the chief
Speaker 1: technology officer, and Steve kay still had a job too
Speaker 1: as the head of marketing. But Kimsey also recognized case
Speaker 1: while he wasn't a tech guy, he wasn't the guy
Speaker 1: to engineer a system or program something. He really had
Speaker 1: a good handle on the business side and the marketing
Speaker 1: side of things, and so Kimsey thought, this is a
Speaker 1: guy I need to groom to become the head of
Speaker 1: the company once I'm ready to hand over control, and
Speaker 1: that would be the case. I've got a lot were
Speaker 1: to say about the early days of a o L,
Speaker 1: but first let's take a quick break to thank our sponsor.
Speaker 1: This new company, Quantum Computer Services, took a lot of
Speaker 1: inspiration from the strategy they used with the Atari twenty hundred,
Speaker 1: but obviously they weren't going to be able to cater
Speaker 1: to that audience that had imploded. So instead they started
Speaker 1: to look at the burgeoning personal computer industry and they
Speaker 1: targeted the Commodore sixty four community. Personal computers were succeeding
Speaker 1: where video game consoles had failed. On May one, Quantum
Speaker 1: Computer Services launched q link are sometimes called Quantum Link,
Speaker 1: which was essentially an online bulletin board service. And I've
Speaker 1: talked about bulletin board services or bbs is in the past,
Speaker 1: but here's a super quick refresher. With the BBS, you
Speaker 1: have somebody who is acting as host. They have a
Speaker 1: computer eader, and they install software on that computer to
Speaker 1: let it be a host for other machines. This computer
Speaker 1: holds all the files that visitors to the BBS will
Speaker 1: be able to interact with, whether they're just reading things,
Speaker 1: or they can download stuff or upload stuff. This computer
Speaker 1: is the home for all of that. Users can direct
Speaker 1: their own personal computers to visit this BBS. They run
Speaker 1: user interface software, a special program that allows them to
Speaker 1: do this, and that also involves dialing a phone number
Speaker 1: connected to the BBS using a dial up modem. So
Speaker 1: the BBS is essentially answering a phone call from another computer,
Speaker 1: and then those two computers have a conversation, just like
Speaker 1: two humans would acceptance data instead of voice or sound.
Speaker 1: This is on a very small scale, similar to what
Speaker 1: happens on the Internet, but this represents a direct connection
Speaker 1: between one computer and another, a client computer and the
Speaker 1: sir for a computer, there's no network there, so the
Speaker 1: connections only passing through the circuits of the phone system
Speaker 1: and otherwise it's a direct connect from computer A to
Speaker 1: computer b so q Link was a service in which
Speaker 1: Commodore sixty four users could subscribe and access various features,
Speaker 1: which included stuff like an electronic mail system that other
Speaker 1: users could participate in, chat features, some file sharing capabilities,
Speaker 1: and some networked games. You were restricted to other Commodore
Speaker 1: sixty four owners who were also using the service. You
Speaker 1: could not use q link to connect with people who
Speaker 1: are using competing services. There was no inner connectivity. It
Speaker 1: cost about ten dollars a month to subscribe to this service,
Speaker 1: and if you wanted to use most of the features,
Speaker 1: there was an additional charge of several cents per minute,
Speaker 1: like six to eight cents per minute after the first
Speaker 1: hour of use each month. So if you subscribed, you
Speaker 1: would typically get sixty minutes of uh plus service is
Speaker 1: what they called it, wrapped up in that and beyond
Speaker 1: sixty minutes he would have to start paying per minute
Speaker 1: of use. Steve Case would work super hard in his
Speaker 1: division to promote que link and get more Commodore sixty
Speaker 1: four users on board. Eventually the company would have about
Speaker 1: a hundred thousand subscribers using Commonore sixty four accounts. Now,
Speaker 1: for the next few bits of information, the next few
Speaker 1: dates I'm going to talk about, there's somewhat muddled. I
Speaker 1: went through a lot of different sources while researching these episodes,
Speaker 1: and the problem is that there are a lot of
Speaker 1: sources that have slightly different dates for when things happened.
Speaker 1: So rather than say definitively that X happened on Y date,
Speaker 1: I'm going to do my best but keep in mind
Speaker 1: some of these could be off by a year one
Speaker 1: way or another, because no one seems to agree on
Speaker 1: when everything actually happened. So circa n Quantum Services, Quantum
Speaker 1: Computers Services expanded by creating similar products called PC link
Speaker 1: and apple Link. They had essentially the same sort of
Speaker 1: features as q link did for a Commodore sixty fours,
Speaker 1: but these were for Apple and IBM compatible computers. They
Speaker 1: also created a service for Tandy computer owners to take
Speaker 1: advantage of the same sort of stuff that q link
Speaker 1: customers had been using. However, these were not interoperable. You
Speaker 1: couldn't use the computer on Apple Link and communicate with
Speaker 1: someone on pc link, so these were all independent services.
Speaker 1: You could communicate with anyone else who was on that service,
Speaker 1: just not with on one of the other services. So
Speaker 1: this again was not the Internet, but rather centralized servers
Speaker 1: that customers were dialing into in order to access these features.
Speaker 1: Sometime around the company launched its first instant messaging service,
Speaker 1: a precursor to what would become a O L Instant
Speaker 1: Messenger or AIM. I'll talk about AIM more later on
Speaker 1: in this series of episodes. One other super important moment
Speaker 1: happened around nine nine. According to the official A O.
Speaker 1: L History, that's when the You've got mail alert debuted.
Speaker 1: So if you've ever heard that phrase, it comes from
Speaker 1: A O L. And specifically it comes from nine. The
Speaker 1: phrase would become iconic in the early days of the Internet.
Speaker 1: It became a bit of a cultural meme. Folks would
Speaker 1: mimic the notification or they would use it as a
Speaker 1: punchline to a joke. Later on, when people had smartphones
Speaker 1: that can actually play sound bites, that would become some
Speaker 1: people's message alert system, you've got mail. The man whose
Speaker 1: voice says You've got mail for A O L is
Speaker 1: Lwood Edwards. Now Edwards. His wife, who was a customer
Speaker 1: service representative for Quantum Computer Services, had overheard Steve Case
Speaker 1: say he really will that they could have a voice
Speaker 1: component to the online service interfaces, that the company had
Speaker 1: something to differentiate their service from other products. So she
Speaker 1: came home and she told her husband, Elwood about this.
Speaker 1: And Elwood was a voiceover performer as well as a broadcaster.
Speaker 1: He had a history in this kind of thing. So he,
Speaker 1: according to the story, went into his living room and
Speaker 1: he got a cassette player, which was a thing back
Speaker 1: in those days. And a cassette tape and he recorded
Speaker 1: himself saying several phrases including welcome and you've got mail,
Speaker 1: and lots of others, and then they sent it off
Speaker 1: to Steve Case and he got the gig. He's obviously
Speaker 1: done lots of other work. Like I said, he's had
Speaker 1: a long history in broadcasting. But Steve Case liked it.
Speaker 1: He said, this is the tone and the technique we want,
Speaker 1: and they went with it. So the phrase would become
Speaker 1: intrinsically linked with A O L Services In those days.
Speaker 1: It was famous enough to become the title of a
Speaker 1: romantic comedy film in n starring Tom Hanks and Meg Ryan.
Speaker 1: A O L got a lot of mileage out of
Speaker 1: those phrases. As for Elwood, in two thousand and sixteen,
Speaker 1: he popped up in online culture after a woman named
Speaker 1: Brandy Barker uploaded a video of Elwood cheerfully reprising his
Speaker 1: famous line he was driving her around because Elwood had
Speaker 1: sort of retired from broadcasting but was working part time
Speaker 1: as an uber driver in Ohio. It's actually a sweet
Speaker 1: little video if you look it up, and that's pretty
Speaker 1: much everywhere online. By the leadership of Quantum Computer Services,
Speaker 1: felt that the company needed a rebranding to better reflect
Speaker 1: what it did what its products were. So Steve Case
Speaker 1: held a contest internally to rename the company, and employees
Speaker 1: got to vote on the various nominees, and the name
Speaker 1: that went out over all the others was America Online,
Speaker 1: and so Quantum Services Quantum Computer Services ditched its name
Speaker 1: for a o L. That happened in nineteen Now a
Speaker 1: o L was not the first online service provider, as
Speaker 1: I said, the first of those came out more or
Speaker 1: less in nineteen seventy nine. These dates are also kind
Speaker 1: of fuzzy because it really depends upon when you would
Speaker 1: consider the beginning of the service. There was some limited
Speaker 1: services in nineteen seventy eight when you could call into
Speaker 1: computers after a certain time because the computers during the
Speaker 1: day would be used for one purpose, but in the
Speaker 1: evening they could, when they would otherwise be idle, they
Speaker 1: could be put to use for this kind of stuff.
Speaker 1: Seventy nine was really when things were starting to take effect,
Speaker 1: and one of those early services was compu Serve. One
Speaker 1: of these days, I'm gonna have to do a full
Speaker 1: episode just about compu Serve. Another one was called the source. Now,
Speaker 1: those services may have been what convinced William von Meister
Speaker 1: to launch Control Video Corporation in the first place in
Speaker 1: ninety three. Might have thought, I want to do the
Speaker 1: same thing that they're doing with computers, but I'm going
Speaker 1: to do it for home video game consoles because that
Speaker 1: market is red hot. So copy serving the source. We're
Speaker 1: pretty simple dial up services. Users could connect using a
Speaker 1: dial up modem to a computer. Sometimes they might even
Speaker 1: have to lift a telephone off of its cradle and
Speaker 1: put it into a special other cradle that's connected to
Speaker 1: the computer they're using. People who have used old modems
Speaker 1: know what I'm talking about. The interfaces were text based.
Speaker 1: They were not graphic user interfaces, both because computers weren't
Speaker 1: really capable of displaying complex images, and also because it
Speaker 1: cut down on how much data needed to go across
Speaker 1: those phone lines and those modems. Because, like I said,
Speaker 1: early modems had really limited data transfer capacities. You didn't
Speaker 1: want to try and send a big file it would
Speaker 1: take forever. Since the early days, the basic services were
Speaker 1: pretty much what you would find if you had been
Speaker 1: a que link user. Typically you'd have some sort of
Speaker 1: electronic mail service bulletin boards or forums for discussion, news feeds,
Speaker 1: that kind of thing. You were limited to communicating again
Speaker 1: with the people who used the same service you did.
Speaker 1: With some minor exceptions, there were some third parties that
Speaker 1: offered up some cross service communication tools that would work
Speaker 1: on services that had similar architectures. But for the most part,
Speaker 1: you were limited to just your own community. You couldn't
Speaker 1: chat with people who used other ones. The online service
Speaker 1: providers might operate a network themselves, but that was an
Speaker 1: internal network that you would connect to. They weren't interconnected
Speaker 1: to other networks like the Internet is, so at least
Speaker 1: at first, this wasn't about connecting to the Internet. It
Speaker 1: was about connecting to a specific online service providers network.
Speaker 1: So online service providers, you could argue, fit somewhere between
Speaker 1: bulletin board services and the Internet. In scale, in a
Speaker 1: o L held its initial public offering, That is, the
Speaker 1: company made the change from being a privately owned company
Speaker 1: to a publicly traded company. The first day of trading
Speaker 1: on the Nasdaq Exchange was on March nineteenth two. The
Speaker 1: opening price for a share of stock in a o
Speaker 1: L was eleven dollars fifty cents. By the end of
Speaker 1: that day, the stock price had closed at fourteen dollars
Speaker 1: seventy five cents. That's an increase of twenty eight point
Speaker 1: three percent, which isn't bad, and the number of shares
Speaker 1: sold meant that A o L was able to raise
Speaker 1: more than sixty million dollars in that process. A O
Speaker 1: L and other online service providers like Prodigy since that
Speaker 1: a more mainstream awareness of the Internet was right around
Speaker 1: the corner, so they were preparing for this. They were
Speaker 1: getting ready for what they envisioned as being an explosion
Speaker 1: of interest in their services, and as it turns out,
Speaker 1: A o L ended up being a little too modest
Speaker 1: as far as expectations go. They would not scale up
Speaker 1: to the size that they needed to, but they wouldn't
Speaker 1: know that till later in according to time and they
Speaker 1: should know more on that. In our next episode, A
Speaker 1: o L introduced a new service in its suite. Users
Speaker 1: could click on an option to access something pretty phenomenal,
Speaker 1: and that would be the Internet. It would go from
Speaker 1: being an online service provider that operated only its own
Speaker 1: services to one that was a gateway to the information
Speaker 1: super Highway. I have more to say about that, but
Speaker 1: let's take another quick break to thank our sponsor. Now,
Speaker 1: the Internet as a thing that the general public could
Speaker 1: readily access has been around for nearly thirty years, but
Speaker 1: before that it was a network that only a relatively
Speaker 1: small number of people knew about, let alone had access to.
Speaker 1: If you were on the Internet before, let's say, you
Speaker 1: were likely a college student didn't and most likely, if
Speaker 1: you were a college student on the Internet, you were
Speaker 1: probably enrolled in at least one computer science class. An
Speaker 1: employee at a research facility might have access to the Internet.
Speaker 1: People in the military had access to the Internet. They
Speaker 1: also had access to millnet, the military specific network that
Speaker 1: is built on the same architecture. So there were a
Speaker 1: few ways that you might have access to the Internet,
Speaker 1: but just a few. It was just it was not
Speaker 1: readily accessible to the average person. Then you had these
Speaker 1: online service providers go beyond their own internal networks to
Speaker 1: connect to the network of networks. The reaction was not
Speaker 1: overwhelmingly positive on for the people who were already on
Speaker 1: the Internet. That is, veterans online were greeted by a
Speaker 1: flood of new users who had no inkling of how
Speaker 1: things would work on the Internet. They hadn't been part
Speaker 1: of the culture that had been forming. They didn't know
Speaker 1: the lingo. There were nubes, in other words, and the
Speaker 1: veterans weren't necessarily kind to the nubs. They resented this
Speaker 1: flood of the uninformed, who were way worse than the
Speaker 1: annual introduction of college freshmen. Those were bad enough. These
Speaker 1: people were even worse. There was a bit of an
Speaker 1: online culture war. But then again, while I call this
Speaker 1: a culture war, you have to remember at most this
Speaker 1: effected maybe a million and a half two million people.
Speaker 1: A o L didn't even have two thousand subscribers yet,
Speaker 1: so most of the mainstream world had not dipped a
Speaker 1: toe in the Internet and viewed the whole thing as
Speaker 1: a big fuss with computer nerds, and I guess it
Speaker 1: mostly was. But A o L was trying to expand
Speaker 1: beyond that narrow niche of computer enthusiasts. They were trying
Speaker 1: to encourage adoption of this, and to do it, the
Speaker 1: company took on a new marketing strategy that became about
Speaker 1: as famous as that You've Got mail line. A o
Speaker 1: L began to produce c d s, compact discs that
Speaker 1: could in all the A o L interface onto a computer,
Speaker 1: and then they began to send those CDs out, They
Speaker 1: put them in magazines and they would mail them directly
Speaker 1: to home addresses, and it got a little out of hand.
Speaker 1: Anyone who owned a computer, and some people who didn't
Speaker 1: began to accumulate collections of A O L compact discs.
Speaker 1: There were jokes about using them as Christmas decorations, or
Speaker 1: coasters or Frisbees. They were everywhere. The strategy was pervasive,
Speaker 1: it was annoying, and it was effective. In Jim Kimsey
Speaker 1: retired as CEO, he stayed on board as the Chairman
Speaker 1: of the board for A O L for a couple
Speaker 1: more years. Steve Case became the new CEO. He had
Speaker 1: proven his worth numerous times by positioning the company's services
Speaker 1: in a way that appealed to the end user. One
Speaker 1: of the big differentiators in the A o L service
Speaker 1: compared to competitors like Prodigy and compu Serve, is that
Speaker 1: A o L's folk was on the ability to create
Speaker 1: communities online. That tied back to that book I talked
Speaker 1: about earlier, the one that inspired Case. When he was
Speaker 1: in his twenties. He had worked to make sure that
Speaker 1: A o L services included features that made it easy
Speaker 1: for users to connect with one another beyond superficial messages.
Speaker 1: By comparison prodigies, services were mostly centered around shopping for
Speaker 1: one thing. The service was largely funded by seers, and
Speaker 1: copy Serve was viewed as more of a tool for
Speaker 1: real tech heads, people who were deeply tied to the
Speaker 1: world of information. It was considered the more geeky of
Speaker 1: the various online service providers. A o L was marketed
Speaker 1: as more user friendly, the service that the average person
Speaker 1: could get hold of and understand in. A o L
Speaker 1: established its own homepage on the Internet. It was an
Speaker 1: online service provider, but the home page did not exist
Speaker 1: till a o L dot com. So, as Steve Case
Speaker 1: at the Helm, another big change was around the corner
Speaker 1: that in retrospect seemed to presage a o l's meteoric rise,
Speaker 1: and this was a change in how the company build customers.
Speaker 1: It was all in pricing up to nineteen six, The
Speaker 1: general approach was to charge users according to the amount
Speaker 1: of time they spent on the service. The longer you
Speaker 1: were on the service, the more you paid, so you're
Speaker 1: paying by the minute. In nineteen ninety six, a o
Speaker 1: L changed its pricing model to a flat fee of
Speaker 1: nineteen dollars n cents for a month of service, so
Speaker 1: it's twenty bucks a month, and you could go online
Speaker 1: as much as you liked, for as long as you liked,
Speaker 1: as many times as you liked within that month. That
Speaker 1: definitely had an impact. At the end of nineteen, a
Speaker 1: o L had grown to one million subscribers after introducing
Speaker 1: this new pricing model. By the end of ninety six,
Speaker 1: they were at five million users, an enormous jump. Such
Speaker 1: a big jump in fact, that A o L's servers
Speaker 1: had trouble with this increase in traffic. On August seven,
Speaker 1: which was a Wednesday, in case you're curious, the service
Speaker 1: crashed and it remained offline for about nineteen hours. It
Speaker 1: was big enough to make the news. CBS News correspondent
Speaker 1: Peter Van Sante called it quote the silence of the
Speaker 1: techno nerds end quote harsh words Van sent now. According
Speaker 1: to A O L, the cause of the problem officially
Speaker 1: was that they were doing regular maintenance on A o
Speaker 1: L servers and something went wrong and it took a
Speaker 1: while to fix. But CBS News cited an unnamed analyst
Speaker 1: with Jupiter Communications who alleged the real reason was that
Speaker 1: A O L had failed to scale up operations and
Speaker 1: keep pace with the increase in the number of users,
Speaker 1: and so it was user overload that caused the problem.
Speaker 1: If that's the case, it's a great problem to have,
Speaker 1: because it's better to have to scramble to meet demand
Speaker 1: than to have to hustle to get enough customers. Too.
Speaker 1: Straight by, you want the problem of having more demand
Speaker 1: than you have supply. Kimsey had stepped down in in
Speaker 1: Mark Seraf, the other co founder, would resign his position
Speaker 1: of senior vice president with the company and leave to
Speaker 1: go do other stuff, which meant that out of the
Speaker 1: three co founders, only Steve Case remained, although to be fair,
Speaker 1: Kimsey was on the board of directors for a little bit.
Speaker 1: In Bolstered by a growing customer base and a solid
Speaker 1: performance in the stock market, A o L began to
Speaker 1: stretch out a bit and made a move on one
Speaker 1: of its major competitors, a company that had been around
Speaker 1: much longer than a O L had It moved to
Speaker 1: acquire compu Serve. The two companies had been competing fiercely
Speaker 1: over customers for years. Sometimes one would offer special deals
Speaker 1: to lure people away from the other service, then the
Speaker 1: other service would do the same, and it went back
Speaker 1: and forth year over year over year between the two companies.
Speaker 1: AOL had the larger number of customers by far by
Speaker 1: which is when this acquisition would become final. A o
Speaker 1: L had around eleven million subscribers and compu Serve was
Speaker 1: closer to two and a half million. The acquisition was
Speaker 1: a little bit on the long and winding side. In
Speaker 1: other words, it got complicated. So let's explain, because it's
Speaker 1: one of those fascinating corporate maneuvers that as a person
Speaker 1: who loves tech and has a history in liberal arts education,
Speaker 1: this was new to me. So before the acquisition, copy
Speaker 1: Serve was part of H and R Block, the tax
Speaker 1: preparation company. H and R Block purchased compu Serve back
Speaker 1: in nineteen eighty for like twenty million dollar ers. By
Speaker 1: n seven, H and R Block was going through some
Speaker 1: major changes at the executive level. They were having real issues,
Speaker 1: which is a fascinating story in itself, and I can't
Speaker 1: really tell it on tech stuff because it doesn't really
Speaker 1: tie into tech, but maybe I'll tell it on the
Speaker 1: brink one day because I think it's a fascinating story. Anyway,
Speaker 1: they were going through some stuff. It got complicated Facebook style,
Speaker 1: and so the board of directors for H and R
Speaker 1: Block decided one of the things the company needed to
Speaker 1: do in order to streamline stuff was divest itself of
Speaker 1: Copy Serve. A L expressed interest right away, saying, we
Speaker 1: would very much like to take that off your hands,
Speaker 1: and we will make an offer, and they offered to
Speaker 1: purchase the company with shares of a O L stock,
Speaker 1: But the board rejected this offer. They didn't feel that
Speaker 1: a O L stock was valuable enough for this to
Speaker 1: make sense. They would prefer to either have stocks were
Speaker 1: more um stable, more established, I guess is a good
Speaker 1: way of putting it than a O L. Or they
Speaker 1: wanted to do it in cash. A couldn't do it
Speaker 1: in cash. But then a third company came into the picture.
Speaker 1: This third company was World Calm, which is another company
Speaker 1: I'm going to have to cover at some future point.
Speaker 1: World Calm had an offer for both H and R
Speaker 1: Block and A O L. World Colm offered to buy
Speaker 1: Copy Serve from H and R. In exchange, World Calm
Speaker 1: would give up some of its stock. That stock was
Speaker 1: seen as being more stable and more valuable than a
Speaker 1: O L stock, and H and R thought, well, we
Speaker 1: can turn that around and sell it right away and
Speaker 1: get the money we want. So the H and R
Speaker 1: Block board agreed to that term, and Company Serve was
Speaker 1: sold to World Calm for one point to billion dollars
Speaker 1: worth of World Calm shares, which H and R Block
Speaker 1: then sold the very next day. After this exchange between
Speaker 1: world Common H and R world Coms sold part of
Speaker 1: compu Serve to a o L. Specifically, it's sold the
Speaker 1: information services part of compu Serve, and it retained compu
Speaker 1: serves network services business because that's the business that World
Speaker 1: com is in, is in network technologies. In addition, a
Speaker 1: o L sold to World Calm its own Advanced Network
Speaker 1: Services division. So World Colm gets the network parts of
Speaker 1: compu Serve and a O L. A o L gets
Speaker 1: compu Serves information systems divisions. World Colm gets a lot
Speaker 1: more of the market share for its business, a O
Speaker 1: L gets more dominant position for its business, and H
Speaker 1: and R Block can count a whole lot of money,
Speaker 1: which is what I understand they're quite good at doing.
Speaker 1: So pretty interesting. Plus, I mean, if you look at
Speaker 1: H and R Block, they made a heck of a deal.
Speaker 1: They had paid twenty million dollars for compu Serve in
Speaker 1: nineteen Then two decades later they sell it for one
Speaker 1: point to billion dollars and compu Serve had been making
Speaker 1: profits in those years in between. So incredible deal for
Speaker 1: H and R. Block A o L. Had secured its place,
Speaker 1: or so it seemed. It had eclipsed a former competitor,
Speaker 1: and it had even brought that company to heal. Sure,
Speaker 1: there were some compu Serve customers who weren't crazy about
Speaker 1: the whole thing, but the future was bright. The rapid
Speaker 1: rise of the company was guaranteed to continue, wasn't it.
Speaker 1: We'll find out in our next episode. If you guys
Speaker 1: have any suggestions for future episodes of tech Stuff, whether
Speaker 1: it's a company, a technology person in tech, maybe there's
Speaker 1: just a moment in tech history you would really like
Speaker 1: me to focus on. Let me know. Send me an email.
Speaker 1: The address is tech Stuff at how stuff works dot com,
Speaker 1: or head on over to our website that's tech Stuff
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