AOL's Bubble Bursts Again
America Online, the one-time darling of the internet bubble, announced that it was considering "offering for free many of the features once available only to its paying subscribers." That's right, AOL is lifting the heavy gates, providing their content to all who would enter.
The problem is that nobody's rushing in. Or ever has.
Many people think that the internet bubble burst some time around 2001. The truth is that the biggest bubble did burst then. But there are still a number of little bubbles floating around out there, waiting to be popped. AOL is just one of them.
AOL has always been a mystery brand. From the very beginning, it was a juggernaut that bypassed its competitors' membership numbers with daring and speed. While dinosaurs and fossils like CompuServe and Prodigy were fumbling around, trying to patch the leaks in their boats with band-aids and wads of cotton, AOL was littering every American checkout counter with free floppy disks and CD-ROM's. It didn't matter if you were a PC or Mac user, AOL was giving away 100, 500 or 1000 free hours of usage, signing up members faster than they could count their money.
The plan worked. Until AOL got into the game, the internet was perceived as a technical toy, too complicated for everyday people to use. AOL changed all that, by promoting its ease of use. Of course, what AOL didn't tell anyone was that the internet they provided wasn't "real" internet; it was AOL's version of the internet.
AOL didn't tell a lot of people about a lot of things. For example, while they spent a lot of time and money trumpeting their soaring membership rate, they effectively dodged every question about their abandon rate, which was rumored to be almost as high. At one time, the unsubstantiated rumblings placed that figure at 50% over an average membership life of just nine months. Which means that for every two members that came in the front door, one was walking out the back.
AOL was able to blitz the market, fueling the bubble that pumped its growth to the point where the juggernaut consumed Time Warner in one of the most laughable mergers in modern history. The buzz on the deal was that AOL had the delivery and Time Warner had the content. Together, they were supposed to be invincible, delivering content and making even more money than either could imagine.
Yet here we are today, with AOL announcing that it simply can't seem to make its subscription business work. Even with Time Warner's content -- we're talking movies, images, text and sound -- they still can't figure out how to make a buck. And for a very good reason:
AOL never has had a brand strategy.
AOL was never about building a brand. It was a stock play, pure and simple. A sales pitch, powered by opportunism and greed. Sure, light users of the web who surf and send e-mail might stick with it, but increasingly, AOL is losing members. No more do they trumpet their membership rate, because it's already fallen from the historical high of 26 million to just over 22 million. Still a lot of bodies overpaying for inferior service, but a far cry from the pre-bubble puffery and a trend that Wall Street would just as soon avoid.
Oh, to be a fly on the wall at the board meeting this week, when AOL's CEO pounded on the table, raking his minions over the coals. If you close your eyes and listen hard, you can hear it, too: "Hey, we built this company by giving it away. We gave away free floppies and CD's and built a monster. We have to get back to basics." Right. Now they're leaving the front door wide open, and the only people going through it are the ones leaving the party.
Of course, if AOL had built their company on a real brand strategy, none of this would have happened. They could have built a real core of truly loyal subscribers who'd have been only too happy to pay a premium for limited internet access. They could have cultivated a sense of brand ownership in paying customers, turning each one into an evangelist, recruiting in new members -- who would have stayed longer than nine months.
They certainly had the tools. They definitely had the technology. And they absolutely had the budget. The one thing they never had is the one thing that killed them: a solid brand strategy.
Hey -- did you hear that? I think another bubble just popped.