America Online - History - 2000s: Transition and Rebranding

2000s: Transition and Rebranding

In January 2000, AOL and Time Warner announced plans to merge, forming AOL Time Warner, Inc. The terms of the deal called for AOL shareholders to own 55% of the new, combined company. The deal closed on January 11, 2001. The new company was led by executives from AOL, SBI, and Time Warner. Gerald Levin, who had served as CEO of Time Warner, was CEO of the new company. Steve Case served as Chairman, J. Michael Kelly (from AOL) was the Chief Financial Officer, Robert W. Pittman (from AOL) and Dick Parsons (from Time Warner) served as Co-Chief Operating Officers.

In 2004, along with the launch of AOL 9.0 Optimized, AOL also made available the option of personalized greetings which would enable the user to hear his or her name while accessing basic functions and mail alerts, or while logging in or out.

In 2005, AOL broadcast the Live 8 concert live over the Internet, and thousands of users downloaded clips of the concert over the following months. In late 2005, AOL released AOL Safety & Security Center, a bundle of McAfee anti-virus, CA anti-spyware, and proprietary firewall and phishing protection software. News reports in late 2005 identified companies such as Yahoo!, Microsoft, and Google as candidates for turning AOL into a joint venture; those plans were apparently abandoned when it was revealed on December 20, 2005 that Google would purchase a 5% share of AOL for $1 billion.

On April 3, 2006, AOL announced that it was retiring the full name "America Online"; the official name of the service became "AOL", and the full name of the TimeWarner subdivision became "AOL, LLC".

On June 8, 2006, AOL offered a new program called AOL Active Security Monitor, a diagnostic tool that checked the local PC's security status, and recommended additional security software from AOL or Download.com. The program rated the computer on a variety of different areas of security and general computer health. Two months later, AOL released AOL Active Virus Shield. This software was developed by Kaspersky Lab. Active Virus Shield software was free and did not require an AOL account, only an internet email address. The ISP side of AOL UK was bought by The Carphone Warehouse in October 2006 to take advantage of their 100,000 LLU customers, making The Carphone Warehouse the biggest LLU provider in the UK.

On August 2006, AOL announced that they would give away email accounts and software previously available only to its paying customers provided the customer accessed AOL or AOL.com through a non-AOL-owned access method (otherwise known as "third party transit", "bring your own access", or "BYOA"). The move was designed to reduce costs associated with the "Walled Garden" business model by reducing usage of AOL-owned access points and shifting members with high-speed internet access from client-based usage to the more lucrative advertising provider, AOL.com. The change from paid to free was also designed to slow the rate of members canceling their accounts and defecting to Microsoft Hotmail, Yahoo!, or other free email providers. The other free services included:

  • AIM (AOL Instant Messenger)
  • AOL Video featured professional content and allowed users to upload videos as well.
  • AOL Local, comprising its CityGuide, Yellow Pages and Local Search services to help users find local information like restaurants, local events, and directory listings.
  • AOL News
  • AOL My eAddress, a custom domain name for email addresses. These email accounts could be accessed in a manner similar to other AOL and AIM email accounts.
  • Xdrive was a service offered by AOL that allowed users to back up their files over the Internet. It was closed on January 12, 2009. It offered a free 5 GB account (free online storage) to anyone with an AOL screenname. Xdrive also provided remote backup services and 50GB of storage for a $9.95 per month fee.

According to AOL CEO Randy Falco, as of December 2007, the conversion rate of accounts from paid access to free access was over 80%. Later in August 2006, AOL informed its American customers that it would be increasing the price of its dial-up access to US$25.90. The increase was part of an effort to migrate the service's remaining dial-up users to broadband, as the increased price was the same price they had been charging for monthly DSL access. However, AOL has since started offering their services for $9.95 a month for unlimited dial-up access.

On September 17, 2007, AOL announced that it was moving one of its corporate headquarters from Dulles, Virginia to New York City and combining its various advertising units into a new subsidiary called Platform A. This action followed several advertising acquisitions, most notably Advertising.com, and highlighted the company's new focus on advertising-driven business models. AOL management stressed that "significant operations" will remain in Dulles, which included the company's access services and modem banks.

In October 2007, AOL announced that it would move one of its other headquarters from Loudoun County, Virginia to New York City; it would continue to operate its Virginia offices. As part of the impending move to New York and the restructuring of responsibilities at the Dulles headquarters complex after the Reston move, AOL CEO Randy Falco announced on October 15, 2007 plans to lay off 2000 employees worldwide by the end of 2007, beginning "immediately". The end result was a near 40% layoff across the board at AOL.

By November 2007, its customer base had been reduced to 10.1 million subscribers, just narrowly ahead of Comcast and AT&T Yahoo!.

On January 3, 2008, AOL announced the closing one of its three Northern Virginia data centers, Reston Technology Center, and sold it to CRG West.

On February 6, 2008, Time Warner CEO Jeff Bewkes announced that Time Warner would split AOL's internet access and advertising businesses into two, with the possibility of later selling the internet access division.

On March 13, 2008, AOL purchased the social networking site Bebo for $850m (£417m). On July 25, 2008 AOL announced it was shedding Xdrive, AOL Pictures, and BlueString to save on costs and focus on its core advertising business. AOL Pictures was terminated on December 31, 2008. On October 31, 2008, AOL Hometown (a web hosting service for the websites of AOL customers) and the AOL Journal blog hosting service were eliminated, after first announcing the impending shutdown on September 30, 2008.

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