Actually, the background sounds are more like ominous synthesizer growls in a horror flick. Miller, who is universally cited as a smart, low-key manager, had better bulk up for battle. He joins AOL when the skies above its Dulles, Va., headquarters are dark with circling vultures (related story). The Time Warner merger has gone horribly wrong, and the AOL service is the fall guy. In hopes of goosing revenues, Miller’s predecessors had treated the membership like a vast ATM machine, barraging the captive crowd with endless pop-up ads and sales pitches. Oops: membership is flat, and revenues are way below expectations. “We lost our way,” says AOL vice chair Ted Leonsis. “We started to listen to Wall Street more than Main Street.”
Competitors smell blood. “Thirty to 40 percent of our new customers are defections from AOL,” says EarthLink CEO Gary Betty. But AOL’s most serious rival is Microsoft’s MSN service; the Softies believe their October release of MSN 8 is an AOL-killer. “We’re going to pitch a better way to use the Internet,” says MSN honcho Yusuf Mehdi. “They have the old model, we have the new.”
Mehdi is referring to what is now an age-old (in Internet time) theory that AOL is a lot like one of its newly acquired properties: the coyote who runs off a cliff and doesn’t realize that there’s no ground underneath him. As people become sophisticated enough to use the Net without the training wheels that AOL provides, they will realize that there’s no need for AOL. This will hit AOL about the time that broadband really catches on: once people have an independ-ent high-speed Internet connection, they’ll balk at paying another fee just for AOL content. Proof: when Time Warner Cable offers both its generic Road Runner service and AOL, most users select the former.
It’s easy to say that AOL is doomed (I once included the company in a column called “Dead Men Walking”; Steve Case has never let me forget it). But that underestimates AOL’s biggest strength: with 34 million members the service has a unique critical mass. It’s the ability of that audience to speak to each other in chat rooms, community boards and instant messaging–all of which are walled off from the rest of the Internet–that really give AOL its value.
What’s more, AOL finally gets it. When I visited AOL’s spick-and-span headquarters near Dulles Airport last week, on dozens of walls and cubicles I saw bumper stickers that read members rule. “We’re back!” crows Ted Leonsis.
The comeback officially begins with the October release of AOL 8.0, the annual update to the service’s software. How does it stack up to Microsoft’s 8? It’s not as substantial as the effort from the come-from-behind team in Redmond, but it’s far from an embarrassment. AOL has improved its pitiful e-mail component with a way to push spam out of the way but, incredibly, there’s still no “forward” button. Meanwhile, Microsoft’s e-mail client is similar to the spiffy one you use at work. AOL now offers a choice of six welcome screens, classified by the members’ interest. But Microsoft lets you micromanage your main screen so that it’s uniquely yours. AOL still makes you painstakingly close every window that pops open; Microsoft automates the process for you.
On the other hand, AOL is able to leverage an advantage Microsoft (7 million users) would kill for: a membership the size of the Eastern Seaboard. The coolest things about AOL’s new software are community-based services like Chat Match, which automatically gathers a group with shared interests, or another feature that lets you use Google technology to instantly search AOL’s chat rooms and boards for items that interest you.
If nothing else, AOL 8.0 probably has enough mojo to placate most members who are almost fed up enough to jump ship. My guess is that even if Jon Miller hadn’t joined AOL, his family would happily welcome the new version, and be AOL users for quite a while. At least until they get broadband.
