Archive for Sunday, December 3, 2000

Ignoring critics, America Online thrives

December 3, 2000


Lynne Keyser isn't bothered by techies who deride her online service as "Internet on training wheels." In fact, that's why she likes America Online.

Keyser has plenty of company, too.

By targeting newcomers, AOL has become the world's leading Internet provider. It recently surpassed 25 million subscribers, some 85 percent of them in the United States.

The Dulles-based company is widely credited with opening the online world to the masses. The secret: dumbing down the AOL interface to appeal to the millions who might otherwise have balked.

"It's been a good introduction for an idiot savant," said Keyser, 45, an interior designer in Traverse City, Mich. "Most of us who aren't that computer literate are going to take the easier path."

Now, AOL is poised to get very big indeed so big that federal regulators reviewing its proposed acquisition of Time Warner Inc. want to make the combined company open its cable systems to competing Internet providers.

AOL Time Warner would have greater control of both the message and the delivery method, offering customers one-stop shopping unmatched by rivals. And AOL would have done so with little technological innovation.

The online giant, launched in 1989, has thrived despite pronouncements through the years of its impending death. When a move to flat pricing in 1996 led to busy signals, critics dubbed the company "America Offline" or "America On Hold." AOL gave partial refunds to settle a class-action lawsuit and moved on.

Its practice has been to dismiss or delay technological breakthroughs as too difficult for the average user.

AOL's strength always was targeting consumers specifically first-time users while rivals CompuServe and Prodigy went after businesses. Today, AOL owns CompuServe, which has 2.8 million subscribers. Prodigy has 2.7 million.

In favoring simplicity over functionality, AOL persuaded computer-shy Americans to try out e-mail, instant messaging and other tools and got them hooked.

"AOL has done a great job of encouraging people," said Stacy Elliott, digital lifestyle adviser at Microsoft Corp., whose competing MSN service has 3.5 million subscribers. "They have some good marketing."

America Online already had 1 million subscribers by 1994, the year people began discovering the Internet en masse. Millions more have since signed up through promotional disks stuffed into mailboxes or falling out of newspaper inserts.

AOL's "You've Got Mail" chant became popular enough to spawn a movie with Tom Hanks and Meg Ryan.

For many Americans, AOL is the Internet.

Unwelcome 'newbies'

Still, many veterans consider the service a joke and frown on its users as clueless "newbies" who wander cyberspace without the proper training in etiquette and techniques. One Internet service provider, FlexNet, won't even take former AOL users, complaining that they lack technical sophistication.

That's fine, from AOL's standpoint.

As senior vice president Jonathan Sacks puts it, AOL users have no need to switch even as their skills improve, just as motorists with automatic transmissions don't later change to manual.

While rivals take an a-la-carte approach, AOL packages access, tools and content together so that teens can chat with friends, moms can coordinate soccer schedules and dads can check on stock quotes all from one service.

AOL wants to become a necessity. Its mission statement: "To build a global medium as central to people's lives as the telephone or television ... and even more valuable."

Universal access

To keep intermediate users from deserting, the company now offers or will soon provide access through such handheld devices as pagers, cellphones and Palm organizers. For an extra fee, it lets users check e-mail using a regular telephone and chat on a television set.

By letting members always with the same password access personal address books, calendars, e-mail and other services from all manner of machine, AOL strategists reason that few people will abandon the company for competing services.

The same strategy is expected to apply also to the high-speed broadband services that AOL will be able to provide to Time Warner's 12.6 million cable subscribers.

"AOL really is the bellwether," said Patrick Keane, a senior analyst at Jupiter Research, who expects AOL to grow stronger with consumers as different media converge. "Now, AOL can really be a kingmaker with broadband."


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