WEBVTT 00:00:00.000 --> 00:00:02.140 Hello and welcome back to the Deep Dive. It is 00:00:02.140 --> 00:00:05.780 Saturday, February 14th, 2026. Happy Valentine's 00:00:05.780 --> 00:00:07.900 Day to you. And happy Valentine's Day to you 00:00:07.900 --> 00:00:12.140 as well. It feels like a strange day to be recording, 00:00:12.339 --> 00:00:14.339 doesn't it? All this pressure to talk about romance 00:00:14.339 --> 00:00:16.859 and connection. Which is exactly why I think 00:00:16.859 --> 00:00:20.140 our topic today is perfect in a really twisted 00:00:20.140 --> 00:00:22.899 way. Oh, how so? Because we're talking about 00:00:22.899 --> 00:00:25.059 a relationship that almost everyone of a certain 00:00:25.059 --> 00:00:27.760 age has had. It was a relationship that... You 00:00:27.760 --> 00:00:29.899 know, it started out exciting and new. OK. Then 00:00:29.899 --> 00:00:31.559 it got a little bit controlling. Then it became 00:00:31.559 --> 00:00:34.340 incredibly frustrating. And eventually it ended 00:00:34.340 --> 00:00:36.320 with us trying to break up while they just begged 00:00:36.320 --> 00:00:38.880 us to stay. And yet for some people, that relationship 00:00:38.880 --> 00:00:42.039 lasted for, what, over 30 years? We are, of course, 00:00:42.039 --> 00:00:46.609 talking about America Online. AOL. The three 00:00:46.609 --> 00:00:48.909 letters that basically were the internet for 00:00:48.909 --> 00:00:51.030 an entire generation. And I know what you're 00:00:51.030 --> 00:00:53.890 thinking. Why are we talking about AOL in 2026? 00:00:54.149 --> 00:00:55.890 Isn't that just a dinosaur? You would absolutely 00:00:55.890 --> 00:00:59.009 think so. But this particular dinosaur has been 00:00:59.009 --> 00:01:01.009 making a lot of noise recently. It really has. 00:01:01.189 --> 00:01:04.890 Just a few months ago, in October of 2025, AOL 00:01:04.890 --> 00:01:08.609 was acquired yet again. This time by an Italian 00:01:08.609 --> 00:01:11.890 tech conglomerate called Bending Spoons for roughly 00:01:11.890 --> 00:01:16.209 $1 .5 billion. $1 .5 billion. That's a staggering 00:01:16.209 --> 00:01:18.530 amount of money for a brand most people associate 00:01:18.530 --> 00:01:21.590 with. Well, with the screech of a 56K modem. 00:01:21.629 --> 00:01:23.909 Exactly. And speaking of that screech, we also 00:01:23.909 --> 00:01:26.129 have to pour one out for a specific era because 00:01:26.129 --> 00:01:30.969 as of September 30, 2025, so just late last year, 00:01:31.310 --> 00:01:34.590 AOL officially, finally. discontinued its dial 00:01:34.590 --> 00:01:36.030 -up service. It is officially the end of the 00:01:36.030 --> 00:01:37.890 line. No more handshakes, no more static, no 00:01:37.890 --> 00:01:40.849 more connecting at 2400 baud. It's over. So here's 00:01:40.849 --> 00:01:43.140 our mission today. We have a massive stack of 00:01:43.140 --> 00:01:45.659 source material, corporate history, merger documents, 00:01:45.959 --> 00:01:47.739 the controversy falls, all of it. We're going 00:01:47.739 --> 00:01:50.099 to unpack how a company that started, and this 00:01:50.099 --> 00:01:52.879 blew my mind, as a video game service for the 00:01:52.879 --> 00:01:55.799 Atari 2600. Yeah, that part's wild. Became the 00:01:55.799 --> 00:01:58.700 internet on training wheels for millions, executed 00:01:58.700 --> 00:02:00.879 the most disastrous merger in American history, 00:02:01.019 --> 00:02:03.379 and then somehow survived as this like zombie 00:02:03.379 --> 00:02:05.760 media company for another two decades. It is 00:02:05.760 --> 00:02:09.219 a wild, wild ride. And I think the reason this 00:02:09.219 --> 00:02:11.500 deep dive is so important right now is that we 00:02:11.500 --> 00:02:15.439 tend to remember AOL as a joke, you know? Totally. 00:02:15.620 --> 00:02:18.159 We remember the funny CDs and the you've got 00:02:18.159 --> 00:02:21.479 male voice. But if you actually look at the DNA 00:02:21.479 --> 00:02:25.069 of this company. It is the blueprint for everything 00:02:25.069 --> 00:02:28.050 we use today. What do you mean? It was the walled 00:02:28.050 --> 00:02:31.389 garden before the Apple App Store. It was social 00:02:31.389 --> 00:02:35.169 media before Facebook. It was, frankly, surveillance 00:02:35.169 --> 00:02:37.789 capitalism before Google even had an algorithm. 00:02:38.050 --> 00:02:39.909 Okay, let's unpack that because you just dropped 00:02:39.909 --> 00:02:41.889 a bomb there that I think a lot of people, myself 00:02:41.889 --> 00:02:44.449 included, kind of gloss over. You said it started 00:02:44.449 --> 00:02:46.810 as a video game service. That's right. If you 00:02:46.810 --> 00:02:49.930 think the origin of AOL is Steve Case in a garage 00:02:49.930 --> 00:02:52.229 somewhere wanting to send an email, you are completely 00:02:52.229 --> 00:02:54.659 wrong. Right. The origin story takes us all the 00:02:54.659 --> 00:02:57.139 way back to 1983. And we're talking about a company 00:02:57.139 --> 00:03:00.080 called Control Video Corporation or CVC. 1983. 00:03:00.180 --> 00:03:02.780 I mean, that's. The Macintosh computer hasn't 00:03:02.780 --> 00:03:05.000 even launched yet. The Internet as we know it 00:03:05.000 --> 00:03:07.460 is basically just a military and academic project. 00:03:07.840 --> 00:03:10.599 Exactly. And the man behind this wasn't Steve 00:03:10.599 --> 00:03:12.879 Case. It was a guy named William Von Meister. 00:03:13.379 --> 00:03:16.840 And he was, well, he was a character, a sort 00:03:16.840 --> 00:03:19.080 of eccentric entrepreneur who had previously 00:03:19.080 --> 00:03:21.979 tried to launch a service to deliver music via 00:03:21.979 --> 00:03:26.000 cable TV. So like Spotify before Spotify. Basically, 00:03:26.139 --> 00:03:28.960 yeah. But the music industry killed it. So he 00:03:28.960 --> 00:03:31.159 pivoted. He pivoted to video games. And the product 00:03:31.159 --> 00:03:33.780 was called GameLine. GameLine. And honestly, 00:03:33.960 --> 00:03:36.930 the technology for its time is f***ed. fascinating 00:03:36.930 --> 00:03:40.090 you have to picture this you have an atari 2600 00:03:40.090 --> 00:03:44.389 console at home you buy this massive chunky modem 00:03:44.389 --> 00:03:47.349 cartridge from cvc for about 50 bucks the modem 00:03:47.349 --> 00:03:49.430 cartridge yeah you plug it into your atari and 00:03:49.430 --> 00:03:51.430 then you plug a phone line directly into the 00:03:51.430 --> 00:03:53.270 cartridge wait hold on you're telling me that 00:03:53.270 --> 00:03:56.430 in 1983 people were downloading games over a 00:03:56.430 --> 00:03:58.750 phone line how did that even work physically 00:03:59.240 --> 00:04:00.699 The Atari didn't have a hard drive. It had no 00:04:00.699 --> 00:04:02.800 storage. That's the genius of it. The cartridge 00:04:02.800 --> 00:04:06.159 itself had a specialized chips and RAM that could 00:04:06.159 --> 00:04:09.259 hold the game data temporarily. You'd dial up, 00:04:09.300 --> 00:04:11.479 you'd pay a dollar, literally one dollar per 00:04:11.479 --> 00:04:14.139 play, and the code for the game would be pushed 00:04:14.139 --> 00:04:16.819 down the phone line into that cartridge's memory. 00:04:17.120 --> 00:04:19.199 You could play for as long as you wanted. As 00:04:19.199 --> 00:04:20.939 long as you didn't turn it off. Provided you 00:04:20.939 --> 00:04:23.259 did not turn off the console. The second you 00:04:23.259 --> 00:04:25.379 did, poof, the game was gone. So it was basically 00:04:25.379 --> 00:04:27.699 a rental, more like having an arcade cabinet 00:04:27.699 --> 00:04:29.519 in your living room that only played one game 00:04:29.519 --> 00:04:31.819 at a time. Precisely. And it even tracked high 00:04:31.819 --> 00:04:34.399 scores. If you were really good, your score got 00:04:34.399 --> 00:04:36.379 sent back to their central server, and you could 00:04:36.379 --> 00:04:38.879 see where you ranked regionally. It was online 00:04:38.879 --> 00:04:42.439 gaming a decade before Doom. That sounds absolutely 00:04:42.439 --> 00:04:45.399 incredible. So why? Why did it fail? Why don't 00:04:45.399 --> 00:04:47.600 we all have game line modules in our attics? 00:04:47.980 --> 00:04:51.839 Terrible, terrible timing. CVC launched GameLine 00:04:51.839 --> 00:04:54.060 right into the teeth of the great video game 00:04:54.060 --> 00:04:58.779 crash of 1983. Oh, right. the et disaster yeah 00:04:58.779 --> 00:05:01.480 the market was just flooded with awful games 00:05:01.480 --> 00:05:04.519 consumers stopped buying consoles retailers were 00:05:04.519 --> 00:05:07.420 panicked and the whole industry just imploded 00:05:07.420 --> 00:05:09.459 cdc was dragged right down with it they were 00:05:09.459 --> 00:05:11.959 near bankruptcy and this is where the cast of 00:05:11.959 --> 00:05:14.579 characters we actually know starts to assemble 00:05:14.579 --> 00:05:16.839 yes this is where steve case comes in he was 00:05:16.839 --> 00:05:19.620 brought in as a marketing consultant he was young 00:05:19.620 --> 00:05:21.879 he'd worked at pizza hut essentially inventing 00:05:21.879 --> 00:05:24.519 toppings like really yeah that was his claim 00:05:24.519 --> 00:05:26.620 to fame he was looking for the next big thing. 00:05:26.759 --> 00:05:29.079 And they also brought in a guy named Jim Kimsey 00:05:29.079 --> 00:05:31.560 as a manufacturing consultant. So you've got 00:05:31.560 --> 00:05:33.939 the boring operations guy and the visionary marketing 00:05:33.939 --> 00:05:37.639 guy. It's the classic startup duo. And when CVC 00:05:37.639 --> 00:05:41.839 collapsed, von Meister left in early 1985. But 00:05:41.839 --> 00:05:44.519 Kimsey and Case, they look at the core technology, 00:05:44.759 --> 00:05:47.600 this ability to connect a home device to a central 00:05:47.600 --> 00:05:50.139 server. And they said, there is something here. 00:05:50.259 --> 00:05:53.199 It's just it's not for Atari games. So they pivot. 00:05:53.339 --> 00:05:56.620 They pivoted hard. to computers they founded 00:05:56.620 --> 00:05:59.100 a new company called quantum computer services 00:05:59.100 --> 00:06:02.660 in may 1985 and this is really important they 00:06:02.660 --> 00:06:04.899 didn't try to build a service for every computer 00:06:04.899 --> 00:06:08.300 out there they struck a deal with commodore for 00:06:08.300 --> 00:06:11.120 the commodore 64. the single best -selling computer 00:06:11.120 --> 00:06:14.319 model of all time an enormous built -in audience 00:06:14.319 --> 00:06:17.079 and quantum launched a service called q -link 00:06:17.079 --> 00:06:20.819 specifically for the commodore 64 and 128. and 00:06:20.819 --> 00:06:23.019 because they were building for just one specific 00:06:23.019 --> 00:06:25.819 machine They could do something the other online 00:06:25.819 --> 00:06:28.339 services couldn't. Exactly. Which was graphics, 00:06:28.560 --> 00:06:31.040 graphics. See, back then, if you used a service 00:06:31.040 --> 00:06:34.160 like CompuServe or the source, you were connecting 00:06:34.160 --> 00:06:36.839 to a mainframe. Your computer at home was just 00:06:36.839 --> 00:06:39.759 a dumb terminal. All you saw was text. Green 00:06:39.759 --> 00:06:41.639 text on a black screen. Right. Like in the movie 00:06:41.639 --> 00:06:44.379 War Games. Very intimidating. Terrifying for 00:06:44.379 --> 00:06:47.620 a normal person. Qlink used the processing power 00:06:47.620 --> 00:06:49.879 of the Commodore itself. It had a graphical user 00:06:49.879 --> 00:06:52.560 interface. You used a joystick or a mouse. You 00:06:52.560 --> 00:06:55.040 clicked on little icons. It used this proprietary 00:06:55.040 --> 00:06:57.759 protocol to send tokens back and forth instead 00:06:57.759 --> 00:07:00.279 of just raw text. It felt like using software 00:07:00.279 --> 00:07:02.319 and not like hacking into the Pentagon. So from 00:07:02.319 --> 00:07:05.240 day one, their whole DNA was user experience. 00:07:05.579 --> 00:07:07.939 They weren't trying to be the most powerful or 00:07:07.939 --> 00:07:09.579 have the most features. They were trying to be 00:07:09.579 --> 00:07:12.500 the friendliest. 100%. Steve Case's vision was 00:07:12.500 --> 00:07:15.259 explicitly to be the online service for people. 00:07:15.310 --> 00:07:17.290 who don't know how to use computers. He wanted 00:07:17.290 --> 00:07:19.790 to make it an appliance, like a toaster. You 00:07:19.790 --> 00:07:21.829 plug it in and it just works. Which brings us 00:07:21.829 --> 00:07:25.629 to 1989. They rebrand quantum computer services 00:07:25.629 --> 00:07:30.069 to something a little more patriotic. A little 00:07:30.069 --> 00:07:32.769 more mainstream. America Online. And that name 00:07:32.769 --> 00:07:35.490 change really signaled a shift in their strategy. 00:07:35.930 --> 00:07:37.870 They weren't just for Commodore nerds anymore. 00:07:38.110 --> 00:07:40.069 They were going after the mass market. They wanted 00:07:40.069 --> 00:07:43.769 everyone. And to get everyone. Yeah. you have 00:07:43.769 --> 00:07:45.889 to invent a whole new way of marketing. Oh, yes. 00:07:46.209 --> 00:07:48.410 I know exactly where this is going. We have to 00:07:48.410 --> 00:07:50.449 talk about the carpet bombing. The carpet bombing 00:07:50.449 --> 00:07:52.389 is the only way to describe it. If you were alive 00:07:52.389 --> 00:07:55.029 in the 90s, you could not escape them. You opened 00:07:55.029 --> 00:07:59.310 a magazine. AOL disc. You bought a box of cereal. 00:07:59.370 --> 00:08:01.170 There was an AOL disc in the bag. You went to 00:08:01.170 --> 00:08:03.490 the movie theater. They handed you an AOL disc 00:08:03.490 --> 00:08:06.329 with your popcorn. It was inescapable. Their 00:08:06.329 --> 00:08:08.529 chief marketing officer at the time, Jan Brandt, 00:08:08.569 --> 00:08:10.449 had this philosophy that the software should 00:08:10.449 --> 00:08:12.689 be a non -issue. She didn't want you to have 00:08:12.689 --> 00:08:14.610 to go to a store and make a conscious decision 00:08:14.610 --> 00:08:18.269 to buy AOL. She wanted to remove every single 00:08:18.269 --> 00:08:21.089 bit of friction. If you even thought about going 00:08:21.089 --> 00:08:23.110 online, oh look, there's a disc on your coffee 00:08:23.110 --> 00:08:25.269 table. There's another one in your mailbox. The 00:08:25.269 --> 00:08:28.649 stats on this are just bananas. I was reading 00:08:28.649 --> 00:08:31.290 in the source material that at one point, something 00:08:31.290 --> 00:08:35.909 like 50 % Half of all CDs produced worldwide 00:08:35.909 --> 00:08:39.509 had an AOL logo on them. Stop and think about 00:08:39.509 --> 00:08:41.710 the scale of that. Not 50 percent of software 00:08:41.710 --> 00:08:45.049 CDs, 50 percent of all CDs. That includes music 00:08:45.049 --> 00:08:48.149 albums, everything. Half of the global production 00:08:48.149 --> 00:08:51.370 capacity for compact discs was occupied by Steve 00:08:51.370 --> 00:08:53.409 Case's marketing department. But was it worth 00:08:53.409 --> 00:08:54.990 it? I mean, that has to be insanely expensive. 00:08:55.009 --> 00:08:56.929 They were basically printing money, just throwing 00:08:56.929 --> 00:08:59.049 it out of helicopters. It was incredibly expensive. 00:08:59.190 --> 00:09:01.850 But the economics work. This is the classic customer 00:09:01.850 --> 00:09:05.370 acquisition cost or CAC versus lifetime value 00:09:05.370 --> 00:09:08.129 or LTV. OK, break that down. Let's say. cost 00:09:08.129 --> 00:09:10.610 them a dollar to produce and mail a disk. If 00:09:10.610 --> 00:09:13.669 they send out 100 disks, that's $100 spent. If 00:09:13.669 --> 00:09:15.950 only one single person signs up from that batch, 00:09:16.090 --> 00:09:18.570 their acquisition cost for that customer is $100. 00:09:19.070 --> 00:09:21.370 Which sounds ridiculously high. It sounds high 00:09:21.370 --> 00:09:25.570 until you realize that user is paying, say, $20 00:09:25.570 --> 00:09:27.870 a month. In just five months, they've paid back 00:09:27.870 --> 00:09:30.710 the acquisition cost. And people stayed on AOL 00:09:30.710 --> 00:09:34.379 for years. The lifetime value of a single subscriber 00:09:34.379 --> 00:09:37.820 was thousands of dollars. So spending $100 or 00:09:37.820 --> 00:09:41.379 even $300 to get a customer was a complete no 00:09:41.379 --> 00:09:43.610 -brainer. It was just a numbers game. A volume 00:09:43.610 --> 00:09:46.730 business. A ruthless numbers game. And it did 00:09:46.730 --> 00:09:49.730 create this massive environmental backlash. There 00:09:49.730 --> 00:09:53.129 was a campaign called No More AOL CDs, where 00:09:53.129 --> 00:09:56.750 IT workers collected over 400 ,000 of these discs. 00:09:56.950 --> 00:09:58.830 I remember that. They built a literal throne 00:09:58.830 --> 00:10:00.830 out of them. They did. They were trying to shame 00:10:00.830 --> 00:10:03.090 the company for all the plastic waste. But you 00:10:03.090 --> 00:10:05.129 know what? The strategy worked. It absolutely 00:10:05.129 --> 00:10:07.309 worked. By the mid -90s, they had just crushed 00:10:07.309 --> 00:10:10.029 the competition. CompuServe, Prodigy. Jeannie, 00:10:10.110 --> 00:10:11.990 they were all left in the dust. Completely. They 00:10:11.990 --> 00:10:15.210 hit 3 million users by 1995. And once those users 00:10:15.210 --> 00:10:16.830 were in, they were inside the walled garden. 00:10:17.029 --> 00:10:19.690 I love that term. Can you explain the walled 00:10:19.690 --> 00:10:21.950 garden concept for our younger listeners? Because 00:10:21.950 --> 00:10:25.960 the Internet today feels so, so permeable. You 00:10:25.960 --> 00:10:28.220 just jump from Google to Reddit to Wikipedia 00:10:28.220 --> 00:10:31.220 without even thinking. Right. So the walled garden 00:10:31.220 --> 00:10:34.200 meant that AOL curated everything for you. When 00:10:34.200 --> 00:10:38.519 you logged into AOL in, say, 1994, you weren't 00:10:38.519 --> 00:10:41.220 really on the World Wide Web. Not at first. You 00:10:41.220 --> 00:10:44.269 were on AOL's private Internet. Exactly. They're 00:10:44.269 --> 00:10:46.610 intranet. They had licensed content. They had 00:10:46.610 --> 00:10:49.389 the New York Times on AOL. They had the Encyclopedia 00:10:49.389 --> 00:10:52.950 Britannica on AOL. They had games, weather, sports, 00:10:53.070 --> 00:10:55.350 chat rooms. It's like an all -inclusive resort. 00:10:55.629 --> 00:10:57.669 Yeah. You check in and you don't really need 00:10:57.669 --> 00:10:59.590 to leave the property because the buffet is there, 00:10:59.649 --> 00:11:01.450 the pool is there, the entertainment is all right 00:11:01.450 --> 00:11:03.870 there. It's the perfect analogy. And for a non 00:11:03.870 --> 00:11:06.370 -technical user, the open internet outside those 00:11:06.370 --> 00:11:09.529 walls was a scary, confusing wilderness. You 00:11:09.529 --> 00:11:11.750 had to know about HTTP protocols. You had to 00:11:11.750 --> 00:11:14.620 type in IP. addresses sometimes. It was messy. 00:11:14.779 --> 00:11:17.200 AOL made it safe. It was Disney World. But the 00:11:17.200 --> 00:11:18.820 people who already lived in the wilderness, the 00:11:18.820 --> 00:11:21.519 hardcore techies, the university students, they 00:11:21.519 --> 00:11:23.580 didn't much like the Disney World tourists, did 00:11:23.580 --> 00:11:26.600 they? They hated them. Oh, they despised them. 00:11:27.000 --> 00:11:30.480 And this brings us to one of my favorite sociological 00:11:30.480 --> 00:11:33.299 events in internet history, the Eternal September. 00:11:33.580 --> 00:11:36.350 The Eternal September. It sounds like a horror 00:11:36.350 --> 00:11:38.789 movie title. For the old school Internet users, 00:11:38.929 --> 00:11:41.549 it kind of was. So here's the context. Before 00:11:41.549 --> 00:11:43.950 1993, if you wanted to talk to people online, 00:11:44.210 --> 00:11:47.110 you used something called Usenet. Which was kind 00:11:47.110 --> 00:11:49.370 of like a prehistoric Reddit. A very good way 00:11:49.370 --> 00:11:51.590 of putting it. It was a system of discussion 00:11:51.590 --> 00:11:55.649 boards, very text -based and decentralized. And 00:11:55.649 --> 00:11:58.009 the people on Usenet were mostly university students, 00:11:58.169 --> 00:12:00.470 professors, and researchers, people who had access 00:12:00.470 --> 00:12:03.029 to university mainframes. Right. And every year 00:12:03.029 --> 00:12:05.409 in September, a new crop of college freshmen 00:12:05.409 --> 00:12:07.929 would arrive, get their first university email 00:12:07.929 --> 00:12:11.090 accounts, and flood Usenet. They would post annoying 00:12:11.090 --> 00:12:13.909 questions. They wouldn't read the FAQs. They'd 00:12:13.909 --> 00:12:15.990 break all the unspoken rules of etiquette. They 00:12:15.990 --> 00:12:18.389 were the noobs? They were the noobs. But usually, 00:12:18.529 --> 00:12:20.809 by October, or November, the freshmen would either 00:12:20.809 --> 00:12:23.590 learn the rules or get bored and leave. So the 00:12:23.590 --> 00:12:26.190 September chaos would end and order would be 00:12:26.190 --> 00:12:29.450 restored for another year. Until 1993. Until 00:12:29.450 --> 00:12:33.750 September 1993. That is the month that AOL built 00:12:33.750 --> 00:12:35.850 a gateway that allowed its millions of users 00:12:35.850 --> 00:12:38.669 to access Usenet for the first time. Suddenly, 00:12:39.090 --> 00:12:41.250 the floodgates didn't just open, they were blown 00:12:41.250 --> 00:12:43.649 off their hinges. It wasn't just a few thousand 00:12:43.649 --> 00:12:46.629 freshmen anymore, it was millions of normal Americans. 00:12:47.389 --> 00:12:49.730 Housewives, plumbers, teenagers, grandparents. 00:12:50.210 --> 00:12:51.730 And they had no idea what the rules were. They 00:12:51.730 --> 00:12:54.309 had no idea. They were typing in all caps. They 00:12:54.309 --> 00:12:57.210 were asking, how do I download pictures in, like... 00:12:57.519 --> 00:13:00.000 advanced philosophy discussion groups, it was 00:13:00.000 --> 00:13:03.379 total chaos. And because AOL kept sending out 00:13:03.379 --> 00:13:06.059 those CDs, the flood of new people never stopped. 00:13:06.279 --> 00:13:08.919 It didn't end in October. It was September. Forever. 00:13:09.340 --> 00:13:11.759 Hence the eternal September. That's incredible. 00:13:11.860 --> 00:13:13.659 And I read about the hidden news group they created. 00:13:13.759 --> 00:13:16.340 That's hilarious. Yes. The Usenet veterans created 00:13:16.340 --> 00:13:20.080 a news group called alt .aolsucks. And the funniest 00:13:20.080 --> 00:13:22.279 part is that AOL actually listed it in their 00:13:22.279 --> 00:13:25.179 own directory. They did not. They did. But they 00:13:25.179 --> 00:13:28.210 changed the description. On Usenet, the official 00:13:28.210 --> 00:13:31.409 description was a gathering place for those who 00:13:31.409 --> 00:13:33.889 despise the great Satan of the Internet. But 00:13:33.889 --> 00:13:37.409 inside AOL, the description was just flames and 00:13:37.409 --> 00:13:39.710 complaints about America online. You have to 00:13:39.710 --> 00:13:42.250 give him credit for allowing it at all. But all 00:13:42.250 --> 00:13:44.690 this growth wasn't just causing cultural problems. 00:13:44.809 --> 00:13:48.169 It was about to cause a massive, massive infrastructure 00:13:48.169 --> 00:13:51.269 meltdown. We have to talk about the pricing shift 00:13:51.269 --> 00:13:54.350 of 1996. This was the moment that nearly killed 00:13:54.350 --> 00:13:56.879 the company. This was their big gamble. Up until 00:13:56.879 --> 00:14:00.809 late 1996, AOL charged by the hour Oh, I remember 00:14:00.809 --> 00:14:03.210 that anxiety. Right. You'd pay a monthly fee, 00:14:03.289 --> 00:14:05.269 which gave you, say, five hours. And then every 00:14:05.269 --> 00:14:07.389 single minute after that cost money. The meter 00:14:07.389 --> 00:14:09.450 was always running. You'd log on, check your 00:14:09.450 --> 00:14:11.590 mail as fast as humanly possible, download everything, 00:14:11.750 --> 00:14:13.789 and then immediately disconnect to read it offline. 00:14:13.950 --> 00:14:16.309 Exactly. It kept network traffic manageable because 00:14:16.309 --> 00:14:19.169 people were financially incentivized to log off. 00:14:19.330 --> 00:14:22.470 But the competition was getting fierce. Smaller 00:14:22.470 --> 00:14:25.549 local ISP started offering unlimited access for 00:14:25.549 --> 00:14:29.070 a flat fee. AOL was losing customers. So Steve 00:14:29.070 --> 00:14:32.039 Case had to respond. He had to. So in December 00:14:32.039 --> 00:14:35.000 1996, he pulled the trigger. $19 .95 a month. 00:14:35.360 --> 00:14:38.000 Unlimited use. And the dam broke. It was catastrophic. 00:14:38.200 --> 00:14:40.600 Just a complete and utter disaster. Suddenly, 00:14:40.700 --> 00:14:42.799 nobody logged off. Why would you? You weren't 00:14:42.799 --> 00:14:45.120 paying by the minute anymore. People would log 00:14:45.120 --> 00:14:46.720 on in the morning and just leave the connection 00:14:46.720 --> 00:14:49.559 open all day long. And AOL's modems physically 00:14:49.559 --> 00:14:52.019 could not handle it. Not even close. You have 00:14:52.019 --> 00:14:53.960 to understand the math. They had built their 00:14:53.960 --> 00:14:56.639 entire network infrastructure, assuming the average 00:14:56.639 --> 00:14:59.080 user would be online for maybe 20 minutes a day. 00:14:59.600 --> 00:15:02.120 Suddenly, the average user was online for three 00:15:02.120 --> 00:15:05.679 hours a day. The busy signal. became the soundtrack 00:15:05.679 --> 00:15:09.440 of America in 1997. I remember coming home from 00:15:09.440 --> 00:15:12.340 school, trying to dial in, and just hearing that 00:15:12.340 --> 00:15:14.240 beep, beep, beep over and over again. I'd set 00:15:14.240 --> 00:15:17.059 it to redial for two hours just to check my email. 00:15:17.299 --> 00:15:19.879 It became a national crisis. I am not exaggerating. 00:15:19.879 --> 00:15:21.639 People were filing lawsuits. State attorneys 00:15:21.639 --> 00:15:23.860 general were opening investigations for false 00:15:23.860 --> 00:15:26.519 advertising. It got so bad, Steve Case had to 00:15:26.519 --> 00:15:29.340 go on television and film a commercial that was 00:15:29.340 --> 00:15:31.919 basically a hostage video. I remember that ad. 00:15:32.059 --> 00:15:34.480 He looked so tired. He looked so stressed out. 00:15:34.759 --> 00:15:37.080 He looked exhausted. He just looked straight 00:15:37.080 --> 00:15:40.019 into the camera and said, we're working day and 00:15:40.019 --> 00:15:43.019 night to fix this. They had to pause all that 00:15:43.019 --> 00:15:46.000 marketing. They had to stop sending the CDs because 00:15:46.000 --> 00:15:47.860 they literally couldn't handle the customers 00:15:47.860 --> 00:15:50.080 they already had. But here's the amazing thing. 00:15:50.500 --> 00:15:54.379 People stayed. Even with the constant busy signals, 00:15:54.519 --> 00:15:57.620 even with all the frustration, they didn't leave. 00:15:57.940 --> 00:16:01.480 Why? Community. The chat room. The chat rooms. 00:16:01.559 --> 00:16:04.220 That was the killer app. People weren't on AOL 00:16:04.220 --> 00:16:05.879 for the news articles. They were there to talk 00:16:05.879 --> 00:16:07.980 to their friends or to talk to complete strangers 00:16:07.980 --> 00:16:10.700 in town square or to find romance in the romance 00:16:10.700 --> 00:16:13.000 connection. It was the first mass market social 00:16:13.000 --> 00:16:15.500 network. It absolutely was. But managing all 00:16:15.500 --> 00:16:18.279 those chat rooms. Yeah. That was a massive labor 00:16:18.279 --> 00:16:20.220 undertaking. And this is where we get into some 00:16:20.220 --> 00:16:22.279 really murky ethical waters that I think are 00:16:22.279 --> 00:16:24.340 fascinating. Your community leader program. Right. 00:16:24.419 --> 00:16:27.440 So AOL realized very quickly they couldn't possibly 00:16:27.440 --> 00:16:30.409 hire enough ped staff. to moderate thousands 00:16:30.409 --> 00:16:32.370 and thousands of chat rooms. It would cost a 00:16:32.370 --> 00:16:35.370 fortune. So they tapped into their most passionate 00:16:35.370 --> 00:16:39.090 users. They created the Community Leader or CL 00:16:39.090 --> 00:16:40.970 program. And who are these people? They were 00:16:40.970 --> 00:16:43.750 volunteers. They were power users who just loved 00:16:43.750 --> 00:16:46.629 AOL. And the company said, hey, if you agree 00:16:46.629 --> 00:16:49.669 to work for us, monitor these chat rooms, enforce 00:16:49.669 --> 00:16:52.490 the terms of service, help out the newbies, we'll 00:16:52.490 --> 00:16:55.809 give you a special badge and free AOL. Wait, 00:16:55.870 --> 00:16:58.750 hold on. Their only compensation was... Saving 00:16:58.750 --> 00:17:00.830 $20 a month. That was it. And we were talking 00:17:00.830 --> 00:17:03.389 about serious work. These people had scheduled 00:17:03.389 --> 00:17:06.549 shifts. They had to log their hours on time cards. 00:17:06.710 --> 00:17:09.049 They had to work a minimum of four hours a week, 00:17:09.130 --> 00:17:12.390 but many were working 20 or 30 hours. They signed 00:17:12.390 --> 00:17:15.150 nondisclosure agreements. They were managed by 00:17:15.150 --> 00:17:18.190 senior volunteers. It was a full -blown corporate 00:17:18.190 --> 00:17:21.829 hierarchy staffed almost entirely by unpaid labor. 00:17:22.069 --> 00:17:24.630 That sounds completely illegal. Well, a couple 00:17:24.630 --> 00:17:27.849 of former volunteers thought so. In 1999, they 00:17:27.849 --> 00:17:30.089 filed a massive class action lawsuit claiming 00:17:30.089 --> 00:17:31.960 violations of the Fairlady Act. Labor Standards 00:17:31.960 --> 00:17:35.000 Act. They argued, look, if it looks like a job 00:17:35.000 --> 00:17:36.940 and it acts like a job and you're telling me 00:17:36.940 --> 00:17:39.480 what I have to show up like a job, you have to 00:17:39.480 --> 00:17:41.420 pay me minimum wage. How did that turn out for 00:17:41.420 --> 00:17:44.480 them? It dragged on for over a decade. But eventually, 00:17:44.660 --> 00:17:48.160 in 2010, AOL settled. They paid out $15 million. 00:17:49.609 --> 00:17:51.890 It's a fascinating precursor to all the debates 00:17:51.890 --> 00:17:54.529 we have now about, say, Reddit moderators or 00:17:54.529 --> 00:17:57.589 Discord admins. AOL proved you could build a 00:17:57.589 --> 00:17:59.369 billion -dollar empire on the backs of volunteers, 00:17:59.609 --> 00:18:02.049 but eventually the bill comes due. So we have 00:18:02.049 --> 00:18:03.809 the rise, the explosive growth, the community. 00:18:03.970 --> 00:18:06.130 Now we have to talk about the absolute peak, 00:18:06.329 --> 00:18:09.589 the Icarus moment where AOL flew way too close 00:18:09.589 --> 00:18:13.630 to the sun, the merger. January 2001, the merger 00:18:13.630 --> 00:18:15.789 with Time Warner. This wasn't just a business 00:18:15.789 --> 00:18:18.130 deal. This felt like a cultural event. I remember 00:18:18.130 --> 00:18:20.529 the magazine covers. The deal of the century. 00:18:20.750 --> 00:18:23.450 It was the largest merger in United States history. 00:18:23.549 --> 00:18:25.450 At the time it was announced, the combined value 00:18:25.450 --> 00:18:28.349 was something like $360 billion. To put that 00:18:28.349 --> 00:18:30.289 in perspective, that's bigger than the GDP of 00:18:30.289 --> 00:18:32.529 many countries. So what was the logic? Because 00:18:32.529 --> 00:18:34.589 looking back on it now, it seems completely insane 00:18:34.589 --> 00:18:36.950 to mash up an internet provider with a movie 00:18:36.950 --> 00:18:39.430 studio and a magazine publisher. The logic was 00:18:39.430 --> 00:18:42.670 convergence. That was the big buzzword. The idea 00:18:42.670 --> 00:18:45.400 was simple. AOL has the distribution. They have 00:18:45.400 --> 00:18:47.380 the eyeballs, the tens of millions of subscribers. 00:18:47.940 --> 00:18:51.220 Time Warner has the content Warner Bros. movies, 00:18:51.599 --> 00:18:55.779 CNN, Time magazine, HBO. So pipes plus content 00:18:55.779 --> 00:18:58.859 equals world domination. In theory. But there 00:18:58.859 --> 00:19:01.920 was a darker, kind of shrewder financial reality 00:19:01.920 --> 00:19:03.980 underneath all that. You have to look at the 00:19:03.980 --> 00:19:06.279 stock market at the time. This was the absolute 00:19:06.279 --> 00:19:08.980 peak of the dot -com bubble. Right. AOL's stock 00:19:08.980 --> 00:19:11.779 was incredibly historically high. But Steve Case 00:19:11.779 --> 00:19:14.039 and the other executives, they were smart. They 00:19:14.039 --> 00:19:15.779 knew the bubble couldn't last forever. They knew 00:19:15.779 --> 00:19:17.619 their stock was, well, let's call it monopoly 00:19:17.619 --> 00:19:20.279 money. It was inflated by hype, not by actual 00:19:20.279 --> 00:19:22.900 profits. Exactly. So they used their inflated, 00:19:22.900 --> 00:19:25.140 hype -driven stock to buy a company with real, 00:19:25.319 --> 00:19:28.140 tangible assets. Time Warner had cables in the 00:19:28.140 --> 00:19:30.059 ground. They had film libraries. They had printing 00:19:30.059 --> 00:19:33.319 presses. Real stuff. It was a... Brilliant move 00:19:33.319 --> 00:19:36.420 by AOL to convert their paper wealth into real 00:19:36.420 --> 00:19:38.900 wealth right before the crash. But then the crash 00:19:38.900 --> 00:19:41.440 happened. Almost immediately. The deal closed 00:19:41.440 --> 00:19:45.039 in January 2001. By late 2001, the dot -com bubble 00:19:45.039 --> 00:19:47.720 had burst completely. The economy slowed down 00:19:47.720 --> 00:19:50.539 after 9 -11. And the valuation of the combined 00:19:50.539 --> 00:19:53.740 company just plummeted. It went from $360 billion 00:19:53.740 --> 00:19:58.460 to like $120 billion. They lost over $200 billion 00:19:58.460 --> 00:20:01.539 billion in value in the blink of an eye. And 00:20:01.539 --> 00:20:03.720 that must have caused some serious, serious tension 00:20:03.720 --> 00:20:06.519 inside the building. It was a civil war, an absolute 00:20:06.519 --> 00:20:09.079 culture clash. You had the old school Time Warner 00:20:09.079 --> 00:20:11.400 suits guys who did three martini lunches and 00:20:11.400 --> 00:20:13.519 flew on corporate jets and cared about prestige. 00:20:13.819 --> 00:20:16.279 And you had the AOL techies guys in T -shirts 00:20:16.279 --> 00:20:18.500 and khakis who cared about growth at all costs. 00:20:18.759 --> 00:20:20.740 And the Time Warner side must have felt like 00:20:20.740 --> 00:20:23.130 they got scammed. Totally. They looked at the 00:20:23.130 --> 00:20:25.609 AOL side and basically said, you conned us, you 00:20:25.609 --> 00:20:27.509 bought our historic company with fake money, 00:20:27.589 --> 00:20:29.470 and now you're dragging our stock price through 00:20:29.470 --> 00:20:31.430 the mud. It got so bad that they eventually took 00:20:31.430 --> 00:20:33.349 the name off the building, right? The ultimate 00:20:33.349 --> 00:20:36.990 insult. That was the final humiliation. In 2003, 00:20:37.170 --> 00:20:39.670 they dropped AOL from the parent company's name. 00:20:39.789 --> 00:20:41.509 They went back to just being Time Warner. It 00:20:41.509 --> 00:20:43.470 was like a divorce where one partner just burns 00:20:43.470 --> 00:20:46.049 all the photos. But the problems weren't just 00:20:46.049 --> 00:20:48.910 financial or cultural. The technological ground 00:20:48.910 --> 00:20:51.910 was shifting right beneath their feet. And this 00:20:51.910 --> 00:20:54.630 is the part that I think really killed AOL as 00:20:54.630 --> 00:20:57.099 a utility. Broadband. This is the nail in the 00:20:57.099 --> 00:21:00.519 coffin, 100%. Remember, AOL's entire business 00:21:00.519 --> 00:21:03.740 model was being your ISP. You paid them to dial 00:21:03.740 --> 00:21:06.640 in and get online. But then cable companies and 00:21:06.640 --> 00:21:09.059 phone companies started offering DSL and cable 00:21:09.059 --> 00:21:11.920 internet. Which was always on and so much faster. 00:21:12.000 --> 00:21:14.299 And you didn't need a separate piece of software 00:21:14.299 --> 00:21:16.819 to connect. Exactly. Once you had a cable modem 00:21:16.819 --> 00:21:18.500 from Comcast, you were already on the internet. 00:21:18.660 --> 00:21:20.819 You didn't need the AOL welcome screen. You didn't 00:21:20.819 --> 00:21:23.680 need the dialer. So why would you pay $20 a month 00:21:23.680 --> 00:21:25.980 for AOL when you're already paying $40? a month 00:21:25.980 --> 00:21:30.779 for broadband. So AOL became redundant, an unnecessary 00:21:30.779 --> 00:21:33.619 metal man. They became a website, just a website 00:21:33.619 --> 00:21:35.759 that people were paying a subscription fee to 00:21:35.759 --> 00:21:38.940 access purely out of habit. They faced this massive 00:21:38.940 --> 00:21:41.839 existential crisis. If we aren't the connection 00:21:41.839 --> 00:21:44.420 anymore, what are we? And they tried to pivot. 00:21:44.460 --> 00:21:46.200 I remember this. They launched the bring your 00:21:46.200 --> 00:21:49.990 own access plan. In 2006, they finally admitted 00:21:49.990 --> 00:21:52.529 defeat. They basically said, OK, fine, we'll 00:21:52.529 --> 00:21:54.250 give you the email and the software for free. 00:21:54.369 --> 00:21:57.109 Just please, please keep visiting our website 00:21:57.109 --> 00:21:59.430 so we can show you advertisements. They had to 00:21:59.430 --> 00:22:01.349 switch from a subscription business to an advertising 00:22:01.349 --> 00:22:03.670 business. And that leads us directly into the 00:22:03.670 --> 00:22:05.769 zombie era, or maybe you'd call it the media 00:22:05.769 --> 00:22:08.470 mogul era. Because after the Time Warner disaster, 00:22:08.890 --> 00:22:11.130 they spun off and became an independent company 00:22:11.130 --> 00:22:13.849 again in 2009. And they brought in a guy named 00:22:13.849 --> 00:22:16.839 Tim Armstrong. Tim Armstrong is a key figure 00:22:16.839 --> 00:22:19.599 in this later stage. He came from Google. He 00:22:19.599 --> 00:22:21.559 understood the new Internet. He knew they couldn't 00:22:21.559 --> 00:22:23.740 sell dial -up anymore, so his strategy was simple, 00:22:23.819 --> 00:22:26.759 content and ad tech. Okay, let's talk about the 00:22:26.759 --> 00:22:29.099 content first. They went on a shopping spree 00:22:29.099 --> 00:22:32.680 that feels very, very confusing in hindsight. 00:22:32.960 --> 00:22:35.279 It was the era of the content farm. Armstrong 00:22:35.279 --> 00:22:38.099 believed that if AOL owned enough websites, they 00:22:38.099 --> 00:22:40.700 could sell enough ads to survive. So they bought 00:22:40.700 --> 00:22:44.480 TechCrunch, the biggest tech blog, in 2010. They 00:22:44.480 --> 00:22:47.839 bought the Huffington Post in 2011 for $315 million. 00:22:48.279 --> 00:22:50.940 Which is huge news at the time. Arianna Huffington 00:22:50.940 --> 00:22:53.200 basically became the queen of AOL for a while 00:22:53.200 --> 00:22:57.700 there. She did. They also had Engadget, Autoblog, 00:22:57.839 --> 00:23:00.579 and MapQuest. Remember printing out directions 00:23:00.579 --> 00:23:05.599 from MapQuest? Turn left in .4 miles. Yeah. Oh, 00:23:05.640 --> 00:23:07.579 I live by MapQuest before smartphones. But the 00:23:07.579 --> 00:23:09.740 most interesting and ambitious failure of that 00:23:09.740 --> 00:23:12.680 era was a project called Patch. Oh, Patch. I 00:23:12.680 --> 00:23:15.319 remember seeing a patch site for my specific 00:23:15.319 --> 00:23:17.559 neighborhood. It was supposed to be hyper local 00:23:17.559 --> 00:23:21.059 news. That was the dream. Tim Armstrong wanted 00:23:21.059 --> 00:23:23.740 a dedicated news site for every single town in 00:23:23.740 --> 00:23:26.720 America, thousands of them. He hired hundreds 00:23:26.720 --> 00:23:29.339 of young journalists right out of school. But 00:23:29.339 --> 00:23:31.680 the economics just didn't work. You can't make 00:23:31.680 --> 00:23:33.539 enough money to pay a reporter's salary from 00:23:33.539 --> 00:23:35.759 ads on a news site for a town of 10 ,000 people. 00:23:35.980 --> 00:23:38.359 Exactly. It just hemorrhaged money for years. 00:23:38.720 --> 00:23:41.059 But while the content side was struggling and 00:23:41.059 --> 00:23:42.859 getting all the headlines, they were quietly 00:23:42.859 --> 00:23:44.599 building something else in the basement, something 00:23:44.599 --> 00:23:48.500 boring but very, very lucrative, ad tech. This 00:23:48.500 --> 00:23:50.359 is the part that explains why the company actually 00:23:50.359 --> 00:23:53.279 survived for so long. Tim Armstrong turned AOL 00:23:53.279 --> 00:23:55.940 into a machine for something called programmatic 00:23:55.940 --> 00:23:58.289 advertising. Okay, explain that for us. What 00:23:58.289 --> 00:24:01.430 is programmatic? So in the old days, if Ford 00:24:01.430 --> 00:24:03.349 wanted to buy an ad on the New York Times website, 00:24:03.710 --> 00:24:06.250 a Ford sales guy would call a New York Times 00:24:06.250 --> 00:24:09.470 sales guy and they'd sign a contract. Programmatic 00:24:09.470 --> 00:24:11.970 is automated. It's software talking to software. 00:24:12.150 --> 00:24:15.549 Ford says, I want to target males age 30, 40 00:24:15.549 --> 00:24:18.289 who live in the Midwest and like trucks. And 00:24:18.289 --> 00:24:21.349 the software automatically bids on ad slots across 00:24:21.349 --> 00:24:24.819 millions of different websites. in milliseconds 00:24:24.819 --> 00:24:27.859 to find those people. And AOL built the software 00:24:27.859 --> 00:24:29.440 that made that happen? They bought a bunch of 00:24:29.440 --> 00:24:31.960 smaller companies, Adapt TV, Millennial Media, 00:24:32.180 --> 00:24:34.059 and they stitched them all together into this 00:24:34.059 --> 00:24:37.420 big platform they called One by AOL. They became 00:24:37.420 --> 00:24:40.500 the middleman. The plumbing. So even if you never 00:24:40.500 --> 00:24:43.900 visited AOL .com, AOL's code was probably loading 00:24:43.900 --> 00:24:46.119 the ads you saw on other sites. That is actually 00:24:46.119 --> 00:24:48.539 genius. Yeah. They stopped trying to be the destination 00:24:48.539 --> 00:24:50.400 and they just started being the plumbing for 00:24:50.400 --> 00:24:54.640 the entire Internet. Exactly. But we can't tell 00:24:54.640 --> 00:24:56.940 the story of this era without taking a pretty 00:24:56.940 --> 00:24:59.539 significant detour into the dark side. Because 00:24:59.539 --> 00:25:01.779 as AOL was struggling to keep customers, they 00:25:01.779 --> 00:25:04.660 got, well, they got aggressive. Unbelievably 00:25:04.660 --> 00:25:06.299 aggressive. We have to talk about the Vincent 00:25:06.299 --> 00:25:09.460 Ferrari call. Oh, boy. If you were on the internet 00:25:09.460 --> 00:25:12.759 in 2006, you heard this recording. It went viral 00:25:12.759 --> 00:25:16.359 before viral was really a thing. So set the scene 00:25:16.359 --> 00:25:20.339 for us. Yeah. June 2006. Vincent Ferrari is a 00:25:20.339 --> 00:25:24.279 30 -year -old guy. He calls AOL to cancel his 00:25:24.279 --> 00:25:26.059 account. It's actually his dad's account, but 00:25:26.059 --> 00:25:29.180 he has all the info. And just in case, he decides 00:25:29.180 --> 00:25:31.460 to record the call. And what happens is basically... 00:25:31.740 --> 00:25:34.119 hostage negotiation. I have the transcript here. 00:25:34.140 --> 00:25:35.839 I just want to read a small bit of it because 00:25:35.839 --> 00:25:39.640 it is truly unbelievable. Ferrari says, I want 00:25:39.640 --> 00:25:41.880 to cancel the account. The rep, whose name is 00:25:41.880 --> 00:25:43.920 John, says, OK, well, I'm looking at your account 00:25:43.920 --> 00:25:45.099 here and I'm seeing that you've been with us 00:25:45.099 --> 00:25:46.960 for a long time. The standard opening. Right. 00:25:47.339 --> 00:25:50.200 Ferrari says, I don't use it. I want to cancel. 00:25:50.339 --> 00:25:53.200 The rep then says, but why? What is wrong with 00:25:53.200 --> 00:25:55.910 the software? Ferrari. I don't need to explain 00:25:55.910 --> 00:25:58.029 myself. I just want to cancel. And then the rep 00:25:58.029 --> 00:25:59.970 says, well, I can't cancel the account until 00:25:59.970 --> 00:26:01.730 you tell me what the problem is so we can fix 00:26:01.730 --> 00:26:04.410 it. And this goes on for 20 minutes, 20 minutes 00:26:04.410 --> 00:26:06.130 of him just saying cancel the account and the 00:26:06.130 --> 00:26:08.250 rep refusing. At one point, the rep literally 00:26:08.250 --> 00:26:11.099 says. I am not going to cancel the account until 00:26:11.099 --> 00:26:15.220 you explain why. It was pure, unadulterated hostility. 00:26:15.400 --> 00:26:18.660 Ferrari posted it on his blog and it just exploded. 00:26:18.660 --> 00:26:22.079 It was on CNBC, The Today Show, everywhere. It 00:26:22.079 --> 00:26:24.700 basically confirmed what everyone secretly suspected. 00:26:25.679 --> 00:26:28.759 AOL was the Hotel California. You can check out 00:26:28.759 --> 00:26:30.880 anytime you like, but you can never leave. And 00:26:30.880 --> 00:26:32.680 it wasn't just a rogue employee. That's the really 00:26:32.680 --> 00:26:35.380 scary part. Soon after that call went viral, 00:26:35.539 --> 00:26:38.920 AOL's internal retention manual leaked. It showed 00:26:38.920 --> 00:26:40.640 that employees were financially incentivized 00:26:40.640 --> 00:26:43.119 to do this. They got bonuses for saving cancellations. 00:26:43.240 --> 00:26:45.119 If they just said, OK, your account is canceled, 00:26:45.240 --> 00:26:47.039 they took a hit on their paycheck. The entire 00:26:47.039 --> 00:26:49.619 system was designed to harass you. They eventually 00:26:49.619 --> 00:26:51.119 had to settle with the state of New York for 00:26:51.119 --> 00:26:53.539 over a million dollars. But the damage to the 00:26:53.539 --> 00:26:57.059 brand was just... It was done. It felt so desperate. 00:26:57.220 --> 00:26:59.440 And then just two months later, in August of 00:26:59.440 --> 00:27:02.180 2006, they had an even bigger and frankly more 00:27:02.180 --> 00:27:05.640 terrifying scandal. The search data leak. This 00:27:05.640 --> 00:27:07.519 one actually scares me way more than the cancellation 00:27:07.519 --> 00:27:10.950 call. It should. It's much worse. AOL released 00:27:10.950 --> 00:27:13.930 a massive data set for academic research. It 00:27:13.930 --> 00:27:16.809 contained 20 million search queries from about 00:27:16.809 --> 00:27:20.970 650 ,000 users over a three -month period. Now, 00:27:21.009 --> 00:27:23.529 they thought they were being safe. They replaced 00:27:23.529 --> 00:27:25.829 the screen names with random numbers. So instead 00:27:25.829 --> 00:27:30.789 of Steve Case, it was user 4417749. But a person's 00:27:30.789 --> 00:27:33.700 search history is like a fingerprint. It's incredibly 00:27:33.700 --> 00:27:36.059 personal and unique. It is more than a fingerprint. 00:27:36.240 --> 00:27:39.000 It's a diary. It's a confession. Think about 00:27:39.000 --> 00:27:41.460 what you type into a search bar. You type medical 00:27:41.460 --> 00:27:44.160 symptoms you're embarrassed about. You type addresses 00:27:44.160 --> 00:27:46.059 to people's homes. You type your own name just 00:27:46.059 --> 00:27:48.000 to see what comes up. And people immediately 00:27:48.000 --> 00:27:49.819 started digging through the data. Of course. 00:27:49.920 --> 00:27:53.859 And the New York Times found user 4417749, based 00:27:53.859 --> 00:27:56.539 on her searches for landscapers in Lilburn, Georgia, 00:27:56.740 --> 00:27:59.700 numb fingers, and dog that urinates on everything, 00:27:59.880 --> 00:28:01.880 they tracked her down. It was a 62 -year -old 00:28:01.880 --> 00:28:03.990 widow named... Thelma Arnold. They knocked on 00:28:03.990 --> 00:28:06.250 her door, read her her own search history, and 00:28:06.250 --> 00:28:08.369 she confirmed it was her. That is horrifying. 00:28:08.650 --> 00:28:11.190 That shattered the entire illusion of anonymity 00:28:11.190 --> 00:28:13.730 online. I think that was the moment we all collectively 00:28:13.730 --> 00:28:16.730 realized, oh, they're watching everything. It 00:28:16.730 --> 00:28:19.470 was the birth of modern privacy anxiety. AOL 00:28:19.470 --> 00:28:22.329 apologized profusely. The CTO resigned, but the 00:28:22.329 --> 00:28:25.390 cat was out of the bag. We are all Thelma Arnold 00:28:25.390 --> 00:28:28.470 now. So despite all these PR nightmares, that 00:28:28.470 --> 00:28:30.680 boring ad tech business we talked about. was 00:28:30.680 --> 00:28:33.440 actually valuable. Valuable enough that in 2015, 00:28:33.700 --> 00:28:37.220 a new giant entered the chat, Verizon. Verizon 00:28:37.220 --> 00:28:41.660 bought AOL for $4 .4 billion in 2015. And let's 00:28:41.660 --> 00:28:44.400 be crystal clear, they weren't buying the dial 00:28:44.400 --> 00:28:46.680 -up business or the email account. No. Not at 00:28:46.680 --> 00:28:49.220 all. They were buying the ad tech stack. Verizon's 00:28:49.220 --> 00:28:51.480 logic was we own the pipes, the cellular network. 00:28:51.559 --> 00:28:53.539 Now we need the technology to serve ads on those 00:28:53.539 --> 00:28:55.640 pipes. They wanted to compete with Google and 00:28:55.640 --> 00:28:57.799 Facebook. And then just to make things more confusing, 00:28:57.900 --> 00:29:00.059 Verizon also bought Yahoo a couple of years later. 00:29:00.200 --> 00:29:02.599 Yes. So suddenly under the Verizon umbrella, 00:29:02.720 --> 00:29:05.680 you had the two fallen giants of the 90s web, 00:29:05.880 --> 00:29:08.599 AOL and Yahoo. And they merged them into a new 00:29:08.599 --> 00:29:11.160 division with the worst name imaginable. Oath. 00:29:11.180 --> 00:29:13.200 Oath. Oh, God, I remember everyone making fun 00:29:13.200 --> 00:29:15.589 of that name. It sounded like a cult. Or bad 00:29:15.589 --> 00:29:18.829 perfume. It was terrible branding. But the strategy 00:29:18.829 --> 00:29:22.509 was at least semi -valid. Combine AOL's ad tech 00:29:22.509 --> 00:29:25.609 with Yahoo's massive user base, fantasy sports, 00:29:25.950 --> 00:29:29.069 finance, mail. They wanted to create a third 00:29:29.069 --> 00:29:31.269 pillar to stand against the Google and Facebook 00:29:31.269 --> 00:29:34.980 duopoly. And did it work? No. It failed miserably. 00:29:35.119 --> 00:29:37.640 The Google Facebook advertising machine was just 00:29:37.640 --> 00:29:40.700 too strong. Verizon spent about $9 billion buying 00:29:40.700 --> 00:29:44.359 AOL and Yahoo. And in 2021, they threw in the 00:29:44.359 --> 00:29:47.440 towel. They sold 90 % of the division to a private 00:29:47.440 --> 00:29:49.680 equity firm called Apollo Global Management. 00:29:49.940 --> 00:29:52.619 For how much? $5 billion. So they bought high 00:29:52.619 --> 00:29:55.720 for $9 billion and sold low for $5 billion. They 00:29:55.720 --> 00:29:58.160 lost billions of dollars on the experiment. And 00:29:58.160 --> 00:30:00.099 that brings us to the now, or at least the very 00:30:00.099 --> 00:30:03.140 recent past. Apollo had it for a few years, stripped 00:30:03.140 --> 00:30:05.119 it down for parts, and then sold it again. In 00:30:05.119 --> 00:30:08.500 October 2025, Apollo sold AOL to Bending Spoons. 00:30:08.640 --> 00:30:11.019 Bending Spoons. I love that name. It sounds like 00:30:11.019 --> 00:30:12.819 a magic trick from the Matrix. Who are these 00:30:12.819 --> 00:30:15.240 guys? What do they do? They are an Italian tech 00:30:15.240 --> 00:30:18.200 firm based in Milan, and their business model 00:30:18.200 --> 00:30:21.200 is fascinating and a little ruthless. They are 00:30:21.200 --> 00:30:24.420 professional aggregators. They buy distressed 00:30:24.420 --> 00:30:27.319 but beloved tech products. They bought Evernote, 00:30:27.380 --> 00:30:30.579 they bought Meetup, and they optimize them. Optimize 00:30:30.579 --> 00:30:32.960 sounds like a euphemism for fire everyone and 00:30:32.960 --> 00:30:35.460 cut all the costs. It often is. They have this 00:30:35.460 --> 00:30:37.880 proprietary tech platform where they migrate 00:30:37.880 --> 00:30:40.740 the code. automate the backend, lay off most 00:30:40.740 --> 00:30:43.480 of the staff, and focus on extracting profit 00:30:43.480 --> 00:30:46.539 from the remaining loyal paying users. They're 00:30:46.539 --> 00:30:48.519 kind of like a recycling plant for old apps. 00:30:48.720 --> 00:30:52.039 And they paid $1 .5 billion for AOL, which implies 00:30:52.039 --> 00:30:54.299 they think there was still a lot of profit to 00:30:54.299 --> 00:30:56.200 be squeezed out of this stone. And there is. 00:30:56.339 --> 00:30:59.599 The source material notes that as of 2025, AOL 00:30:59.599 --> 00:31:02.980 still has 30 million active users. 30 million. 00:31:03.440 --> 00:31:05.640 Who are these people? Are they bots? No, they're 00:31:05.640 --> 00:31:07.940 real people, mostly older. They are people who 00:31:07.940 --> 00:31:10.799 have had their at all dot com email address for 00:31:10.799 --> 00:31:13.759 30 years. It is their digital identity. It's 00:31:13.759 --> 00:31:15.400 on their business cards, their bank accounts, 00:31:15.519 --> 00:31:17.880 their doctor's forms. Switching your primary 00:31:17.880 --> 00:31:20.579 email address is a nightmare. So they just stay. 00:31:20.779 --> 00:31:22.759 They log in to check mail. They read the news 00:31:22.759 --> 00:31:25.359 on the home page. They are a captive, monetizable 00:31:25.359 --> 00:31:28.200 audience. But the dial up that is truly officially 00:31:28.200 --> 00:31:31.539 gone. Yes, the source confirms it. On September 00:31:31.539 --> 00:31:35.240 30, 2025, AOL officially discontinued the dial 00:31:35.240 --> 00:31:37.519 -up service for good. It's just incredible to 00:31:37.519 --> 00:31:40.480 think that as recently as 2015, there were still 00:31:40.480 --> 00:31:43.700 2 .1 million people paying for AOL dial -up. 00:31:43.960 --> 00:31:45.980 Inertia is the most powerful force in all of 00:31:45.980 --> 00:31:48.019 business. Some people just keep paying the bill 00:31:48.019 --> 00:31:49.700 because they forgot about it or they think they 00:31:49.700 --> 00:31:51.880 still need it for their email to work. But by 00:31:51.880 --> 00:31:54.460 2021, it was down to just a few thousand and 00:31:54.460 --> 00:31:57.579 now zero. The screeches have finally gone silent. 00:31:57.720 --> 00:32:00.059 So as we look back on this entire journey, from 00:32:00.059 --> 00:32:02.200 downloading Atari games over a phone line in 00:32:02.200 --> 00:32:05.160 1983 to being acquired by an Italian optimization 00:32:05.160 --> 00:32:08.359 firm in 2026, what's the synthesis here? How 00:32:08.359 --> 00:32:10.940 should we remember AOL? You know, it is so easy 00:32:10.940 --> 00:32:13.559 to mock AOL. It's easy to laugh at the you've 00:32:13.559 --> 00:32:16.660 got mail guy and the carpet bombing CDs. But 00:32:16.660 --> 00:32:18.259 I think we really need to give them their flowers. 00:32:18.779 --> 00:32:21.400 AOL taught an entire generation of people how 00:32:21.400 --> 00:32:23.680 to be online. It was the training wheels for 00:32:23.680 --> 00:32:25.940 the internet. It was more than that. It normalized 00:32:25.940 --> 00:32:28.299 the behaviors that we all do every single day 00:32:28.299 --> 00:32:31.400 without thinking. Think about it. Instant messaging 00:32:31.400 --> 00:32:34.500 aim. is the direct grandfather of WhatsApp, Slack, 00:32:34.720 --> 00:32:37.640 and Discord. The profile you had on AOL Hometown, 00:32:37.839 --> 00:32:39.740 that is the grandfather of your Facebook page. 00:32:39.920 --> 00:32:43.160 The curated news feed, AOL invented that. And 00:32:43.160 --> 00:32:45.480 the freemium model. giving away the software 00:32:45.480 --> 00:32:47.720 for free to get you hooked on the monthly subscription. 00:32:48.099 --> 00:32:50.700 Exactly. And for better or worse, the surveillance 00:32:50.700 --> 00:32:53.819 model, tracking what you do online to sell targeted 00:32:53.819 --> 00:32:56.799 ads. We often look at AOL as this big, clumsy 00:32:56.799 --> 00:32:59.599 dinosaur that couldn't adapt and died. But if 00:32:59.599 --> 00:33:02.460 you actually look at its DNA, it won. Its DNA 00:33:02.460 --> 00:33:04.759 is everywhere. We are all still living in the 00:33:04.759 --> 00:33:06.859 world Steve Case built. The graphics are just 00:33:06.859 --> 00:33:09.640 better now. That is a haunting thought. We are 00:33:09.640 --> 00:33:11.880 all still in the walled garden. The walls are 00:33:11.880 --> 00:33:15.029 just invisible now. And the garden is a lot bigger. 00:33:15.210 --> 00:33:17.910 We traded the blue AOL interface for the blue 00:33:17.910 --> 00:33:20.609 Facebook interface, but the fundamental game 00:33:20.609 --> 00:33:23.589 is exactly the same. Keep the user logged in, 00:33:23.710 --> 00:33:26.410 keep them clicking, and sell their attention 00:33:26.410 --> 00:33:28.849 to the highest bidder. Well, on that cheerful 00:33:28.849 --> 00:33:31.329 note, we are going to wrap up this Valentine's 00:33:31.329 --> 00:33:34.710 Deep Dive. If you still have an aol .com email 00:33:34.710 --> 00:33:37.569 address, wear it like a badge of honor. You are 00:33:37.569 --> 00:33:40.170 a pioneer. You are a survivor. And maybe, just 00:33:40.170 --> 00:33:42.009 maybe, check your credit card statement and see 00:33:42.009 --> 00:33:44.069 if you're still paying for it. That is very good 00:33:44.069 --> 00:33:46.529 advice. Thanks for listening to the Deep Dive. 00:33:46.529 --> 00:33:47.970 We will catch you on the next one.