AOL’s Top 5 Blunders of 2008

AOL's top 5 blunders of 2008.

Asking why AOL screws up nearly everything they touch is like asking why the sun shines on a clear day, but I’m a sucker for tradition, and for two years running I’ve done so, so why not a third? It’s reasonable to expect this is the last Top 5 I’ll ever do on AOL since the company is dying. With no further ado, AOL’s top five blunders of 2008:

AOL purchases Bebo. Why?

In AOL’s biggest “WTF?” moment of 2008, they blew a cool $850 million on Bebo, a mostly UK-based social network that only 5 million Americans visit regularly, then admitted they wasted their money on it. To put the gargantuan-ness of this mistake into perspective, imagine one billion dollars. Now imagine Facebook. Now imagine that not even Facebook, the biggest, most successful social network on Earth besides MySpace, is not worth anything near one billion dollars. It probably isn’t. Subtract a measly $150 million dollars from that billion we were just kicking around, and that’s what AOL paid for an overseas flea circus that word of mouth says makes the population of MySpace look upright, prudish, and filthy rich in comparison.

Further imagine that even the most successful social network cannot survive without money. That’s not a fantasy – that’s the truth. So far both MySpace and Facebook have proven hard to monetize. People tune out or block out the ads that support those sites, so the profit margins are at best slim. Now imagine that Bebo doesn’t have anywhere near MySpace’s audience or reach. Do the math on the ad reach – ain’t too pretty, is it?

In the end, it looks like AOL paid $850 million to do an integration of the Bebo and AOL home pages that a small team could have whipped up in a week flat for say, $6,000. It’s like NetVibes all over again – did Netvibes cost anyone $850 million? $850 million bought AOL little more than the right to brag on Bebo’s home page:

“The top part of the homepage [now] allows you to receive email updates from AOL, Yahoo Mail, [and] Gmail directly to your Bebo homepage. Underneath that section, you will see a “changes” area that let’s you see what is going on with your AIM, Twitter, Flickr,, YouTube and, of course, your Bebo friends. On the right hand side, you will see a media recommendations area which includes all of your subscriptions and stuff we think you’ll enjoy.”

Wow. $850 million for a web page integrated with some of AOL’s services that will gain traction with not one more person in the US than it has so far. Being a fiscally austere person, this sort of extravagance gives me fits. Do you know what AOL could do with $850 million dollars?

  1. AOL could give a $212.25 refund to every person in the US who has ever used AOL, assuming 40 million total signups and maybe 20 million users who got screwed by over-billing practices at some point.
  2. They could pay Google back every penny they lost taking a dumb risk on AOL as an ad and search partner – not that Google deserves to be compensated for their hard-to-explain short-sightedness.
  3. They could simply hang onto it to add to their lousy bottom line. I could get more creative but I’m too tired to bother.

AOL raises dial-up rates again.

While it’s not as flashy as news of AOL buying Bebo, AOL raising dial-up rates from $9.99 with tech support to $9.99 without tech support or $11.99 with tech support is the stupidest thing they did all year. No one wants dial-up anymore, so no one will use it if they can help it. Dial-up has fallen so far out of favor with the masses that they willingly pay top dollar for DSL, broadband, and even high-speed dial-up, with it’s promise of near-perfect image and data compression at top speeds and a price-tag of about $17 a month. Today’s websites, based heavily on Flash, AJAX, and image-rich style sheets, just don’t load well at dial-up speeds.

Even AOL’s dial-up users realize this, with memberships dropping from 9 million to 6.9 million year-over-year. AOL’s answer to declining subscription revenue was not to keep the rate low to attract as many users as possible, but to raise it to maximize profit on the few people left who either like or must use AOL dial-up for whatever reason.

The only saving grace for AOL users is that from word-on-the-street talk, I gather most people who use AOL dial-up still pay about $23.90 a month for it. Like my sister-in-law, who hasn’t used her AOL connection in years – so anyone who either signs up now or asks for the new, “lower” $11.99 rate will actually save money compared to how much AOL dial-up used to cost. What a thought!

AOL blew the Google deal.

This had to be the easiest deal Google ever made with any company: “Let us help improve your search scores and run ads against your sites in our results. In return for that, we’re buying 5% of your company”. How could anyone screw up a deal that sweet? Leave it to AOL to find a way. Google is taking a huge loss on the deal, writing it off to the tune of perhaps $500-750 million, nearly as much as the Bebo purchase cost AOL. Talk about fiscal irresponsibility…

AOL didn’t buy Yahoo!. Yahoo! didn’t buy AOL.

As I’ve said many times over the years, I think an AOL-Yahoo! mash-up would be match made in heaven given audiences of similar ages, income levels and interests (shopping, chat, email, social communities, etc). I can’t see why this deal shouldn’t be done. But leave it to the perennially indecisive Jerry Yang, Yahoo’s former CEO, to sit on his hands instead of doing more than “talking to” AOL, and leave it to Yang’s spiritual twin, Jeffery Bewkes, to engage in the same hand-sitting while encouraging the same fruitless “talks”. What a waste of both companies combined potential – which I think would be a marvel previously unseen in this world.

AOL leaves Journals and Hometown users hanging.

The way AOL handled the closing of AOL Journals and Hometowns was a perfect disgrace – and a typical example of how AOL alienates even their most loyal customers, hurting their bottom line in the long run more than their stupidest purchases ever could. Users of these sites were given scant notice of AOL Journals and Hometowns closing down – about 30 days – and no way whatsoever to automatically download or transfer files to another site.

Feeling for them, I searched the Internet for a program that could handle the download process without users having to cut and paste perhaps thousands of posts into Word or other cumbersome Office and note-taking programs.

Joe Manna soon pitched in with more tips to help AOL users get their files, and finally, one week after AOL gave notice, they finally teamed with Google to get user’s files moved to Blogger. Unsatisfied with Blogger as a new platform, many users chose to simply download and save their files instead.

After Hometown closed, People Connection, Joe’s blog and my blog continued to get hit with desperate pleas from AOL users who missed the deadline. In a last-minute save, Joe O. of, a former Hometown user, did some research and found AOL left the Hometown files up on their FTP servers after the deadline. He contacted me and Joe Manna to tell us how to download the files, and Joe Manna and I did what we could to get the word out to AOL users. Of all of AOL’s blunders, this was the most inconsiderate one of all.