Services & Software

AOL's coming of age

America Online has had a year full of tremendous highs and lows, and so far it has come out on top.

In October 1996, America Online (AOL), the leading online service, restructured and launched flat-rate pricing, another chapter in its tumultuous history. In spite of it all, AOL has grown exponentially and continues to dominate the market.

15 months in AOL history
AOL announces that in December 1996, it will start offering unlimited access to users for a flat monthly rate, setting off a storm both on its own service and in the industry. AOL says it no longer will rely just on subscriber fees for revenue, but will lean more on advertising and commerce. As a result, AOL also decreases its number of content partners.

Robert Pittman, founder of MTV, joins the service as chief executive of the AOL Networks division.

Dec. 1996-
April 1997
As an aftermath of flat-rate pricing, AOL's system is swamped by users who face constant busy signals. Various class-action suits are filed and attorneys general from several states get involved. AOL eventually agrees to a refund and to stop marketing its service. AOL also vows to beef up its network.
AOL launches Digital City, its localized content guide, on the Web.
Feb. 25 Tel-Save Holdings announces an exclusive multiyear pact to market to AOL's members. This is the beginning of several deals in which advertisers pay AOL millions of dollars to be able to market to AOL's membership.
March 13 AOL launches its own search engine.
April After months of being plagued by busy signals and related legal problems, AOL announces it will slowly start marketing its service again.
May 5 AOL announces a slight third-quarter profit.
June 10 CUC International, a major online marketing firm, announces that it is paying AOL $50 million to market its services to AOL customers.
July 17 AOL announces that it will charge premiums for certain games on the service. This fuels speculation that AOL will shift many of its areas to premium pricing, although AOL denies it has any such plans.

AOL announces that Web-based car-purchasing site Auto-By-Tel will pay $6 million to market its service to AOL customers.

July 24 AOL, reacting to an onslaught of negative publicity, rescinds a policy that would have allowed it to share the phone numbers of its members with its partners, which include major telemarketers. The incident shows how important privacy is to members.
Aug. 7 AOL reports a fourth-quarter profit.
Sept. 8 AOL announces that it will acquire the online services division of its chief rival, CompuServe. As part of the deal, AOL sells ANS Services, which provides Internet access, to WorldCom.
Oct. 1 CompuServe introduces flat-rate pricing.
Nov. AOL starts using the court system to crack down on junk emailers.
Nov. 17 AOL reaches the 10 million membership mark six weeks ahead of schedule.
Dec. 4 AOL secures a two-year, $200 million line of credit. With AOL's other recent deals, this makes its cash on hand considerable.
Dec. 11 AOL announces plans to beef up its Internet presence with its own portal site, "," which will compete with the likes of Yahoo.
Dec. 16 AOL hits the 1 million membership mark abroad.
Dec. 29 AOL makes its new service interface, AOL 4.0, available to the first 50,000 users to download.
Dec. 30 CompuServe rolls out "C," its Web-based service.
Jan. 21,
AOL admits it made a mistake when a customer service representative released private information about an AOL member to the Navy.
Jan. 31 The three-way deal in which AOL acquired CompuServe becomes formalized.
Feb. 8 CompuServe announces that it has cut a deal with one of AOL's partners, long distance phone company Tel-Save Holdings. It indicates that AOL is using the same strategy with CompuServe that it has with its own network: charging partners for access to its members.
Feb. 9 AOL raises prices and announces CompuServe layoffs. AOL also announces that Bob Pittman will have more power. Pittman is largely credited for AOL's phenomenal business success over the last year.

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