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In 1995, when America Online first allowed its members to surf the Internet and the World Wide Web, seasoned users of the Internet feared being swamped by "newbies" who were unschooled in netiquette and threatened to foul the waters of cyberspace for all time. As it turns out, those fears were misplaced—or perhaps not sufficiently dire. It is AOL itself that is emerging as a potent threat because of its successful and expanding dominance of the cyber-marketplace.
From Kara Swisher's new book, aol.com, it would be easy to conclude that the folks at America Online are wearing the white hats. Swisher, a business journalist, has had a front-row seat in covering the rise of the online industry, perhaps the definitive nineties business story. But she is surprisely unreflective in analyzing the place of AOL and its CEO, Steve Case, in the cultural ethos of the late 1990s.
Launched in 1989, America Online has become—at least for a precarious moment—the preeminent player in cyberspace. Last year, AOL reported a record membership of 13.5 million; those members were viewing an estimated 1 billion pages on the Web daily. AOL has continued to leverage its market strength into market dominance. In August, AOL and other leading Internet partners launched the so-called TeraPOP, one of the largest exchange points on the Internet. TeraPOP can handle 4,000 megabits of information each second and will allow consumers to have significantly faster access to the Internet.
As recently as 1996, many analysts were penning obits for AOL, CompuServe, and other proprietary online services because consumers were flocking to the Internet itself, and the imminent launch of MSN (Microsoft Network) was sure to deliver the mortal blow. Much to our astonishment, it did not turn out that way, and Case, AOL's boy wonder, is on the road to doing to cyberspace what Bill Gates has done to the software industry.
What threat does AOL pose to cyberspace? Look at it this way. The dynamics of cyberspace have changed dramatically over the last four years. Wall Street muscle, Main Street populism, and Madison Avenue marketing have relandscaped cyberspace into a free trader's paradise for global commerce. No entity has been more at the forefront of this development than America Online.
The dominance of AOL has allowed it to do many things. Raise prices, for example. Unlimited access now costs $21.95, 10 percent more than a year ago. Also, member use is tightly scripted in important aspects. Alternative software, such as Microsoft Outlook, may not be used to process e-mail. Thereby, AOL ensures that electronic ads, among many other sales pitches, greet members as they log on, download files, and read e-mail. In addition, AOL may steer members to places they may not want to go. Recently, Walter Mossberg, the influential Wall Street Journal computer columnist, found himself directed to AOL's Sports Channel after he typed in ESPN. Needless to say, ESPN.com has nothing to do with the Sports Channel.
AOL's boldest corporate move to date was announced in November. The company will acquire Netscape Communications, the pioneer in Web browser software, in a stock-for-stock transaction, totaling $4.2 billion and giving AOL one of Internet's most famous brand names.
AOL's triumph over its competition, well chronicled in Swisher's book, rests on the American obsession with brand names. Nothing, including the Bible, has escaped attempts at branding. Think french fries. Head for McDonald's. Need your taxes done? Try H&R Block. Are you thirsty? Reach for Gatorade. Brands promise many things, including a level of quality, reliability, and service. The brands we use define who we are as consumers, our spending practices, and our likes and dislikes.
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