Though relatively brief, the latest outage may highlight AOL's weaknesses in what has become an extremely competitive market.
In the long run, however, the latest disruption underscores a more lasting problem for the online giant. An outage of any significant duration at a time when AOL so dominates the market may leave the company vulnerable to renewed criticism as it seeks to justify its recent $2 jump above the industry's standard monthly charge.
Considering its size, executives have often said AOL should be forgiven occasional email lapses and other system problems. Yet many people see it the other way around: The bigger AOL gets, the more dominant it becomes--and the more money it makes, the more people pay attention to its foibles.
"I used to have the attitude that these things happen," said Allen Weiner, principal online analyst for Dataquest. "But since AOL essentially controls a significant amount of consumer traffic to the Internet, I think it magnifies every time it have an experience like that, that it?s not prepared to have such a role. It will cause people to think twice about using AOL as their primary Internet connection."
Service problems have been a nettlesome issue for years at AOL, even resulting in legal action among its membership. AOL tried to relieve itself of this burden by selling its networking operations to WorldCom last year, but yesterday's outage--the result of an electrical failure--shows how easily service issues can come back to haunt any company in the Internet access business.
At the same time, AOL is facing increasing competition in a variety of forms. While there weren't many alternatives to AOL 18 months ago, today's Web content providers are competing heavily to create what those in the business call "portals" to compete with online services.
These are pages designed to serve as a user's gateway to the Internet, providing such services as free email, search services, and information organized along channels. Even AOL has gotten into the business in a big way, transforming its home page, AOL.com, into a portal site.
Yesterday's outage "opens the window a little bit larger to what I see as a tremendous opportunity in 1998 to people using portal Web sites as their Internet service," Weiner added.
Others argue that, while AOL users have traditionally complained loudly about the service, they generally have stayed on while new subscribers have been joining the service in droves. The online service's membership stands at 11 million today.
The company has managed to keep its investors happy with positive reports and continual deals with content providers that pay the company millions of dollars for access to AOL's customers. It is arguably in a stronger market position than it ever has been and, like so many times before, it may simply prove its detractors wrong.
For these reasons, some believe that it will take a lot more than a 2-1/2-hour outage to do any significant damage to the online giant, especially since it comes a year after AOL was so busy that users couldn't even get on the system. Those problems resulted in lawsuits and user outrage and yet, the service continued to grow.
"AOL every now and again has outages. It's bad that it happened during peak hours," said Mark Mooradian who analyzes the company for Jupiter Communications. But, he added, "this type of thing has to happen with a great deal of regularity before you're going to see any sort of substantial defections."
But critics wonder if members will become fed up with too many outages or even glitches, advertising, junk email sent to them from outside the system, and constant advertisements. That saturation point may be sooner than people think.
Take, for instance, J. Alan Rueckgauer, an AOL member since 1994 and a 30-year computer industry veteran.
"No one's impervious to technical glitches or failures. Some are mishaps that there's little that can be done to prevent. Others result from inadequate business and management practices," he acknowledged in an email interview.
"However, AOL has a deeply rooted history and culture of denying that problems exist unless it's something so big they can't gloss over it. They are notorious for dragging their feet about addressing problems they have had to recognize," he added.
Adding to their frustration, Rueckgauer and others said they could not find information about the outage on AOL.
Company spokeswoman Wendy Goldberg said AOL posted information on its opening page last night. But by this morning, the posting was gone. She said information also was posted in a separate area, called "System Update."
Today at 10:30 a.m. PT, the message in that area read, "There is currently no Community Update at this time. For system maintenance information, please go to Keyword: Pulse of AOL." Pulse of AOL had no information on the outage, either.
Goldberg said AOL does its best to communicate with its customers through constant updates and messages from company president Steve Case.
"We always want to make sure our members know that we intend to provide them with the best possible online experience," she added. "That's the bottom line."