AOL’s problem was not that it was a walled garden

As I think about my last post on walled gardens and dumb pipes, a simple thought occurs to me: AOL didn’t fail because it was walled garden.  AOL failed because it was a dumb pipe.

The value proposition of AOL back in the day was, “We’ll pre-digest the Internet for you, and put it in a safe, packaged form that’s good for beginners, children, and digital immigrants”.

Actually, the value proposition back when I signed up in the early ’90’s was, “We’ll give you an Internet ID that’s a name, not a number”.  Recall that their big competitor walled garden at the time, Compuserve, had User IDs that were a pair of numbers.  <300129, 1235> or the like.

But by the time we got to the beginning of the end for AOL, they had a walled garden: they figured that their inmates would be too terrified to leave.

I suspect what happened, however, was that the “inmates” began to receive offers from other service providers that were 1) competitive in price and 2) better in terms of bandwidth and latency.  So it’s not that people became tired of the walled garden, it’s that another service provider — in what became essentially a commodity market — had better service for a lower price.

Classic Dumb Pipe stuff.

Now, to be fair to the argument, the “features” of AOL — especially AOL IM, which was hegemonic for a while — should have kept AOL as a “smart pipe” and didn’t.  But it’s amazing how quickly people found those features irrelevant when the price was right.

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