When AOL was Crack Cocaine

2


Scan originally appeared in Wired 01.02, May 1993.



The story on how AOL discs were bundled with frozen ham, just to give you that one little sip that got you hooked.

This insert from one of the very first Wired editions was the precursor of what was to become the largest carpet-bombing of a nation ever – with floppy discs.

By 1994, AOL had done the math. It turned out their product – dial-up access to the growing world wide web – was like crack cocaine: Once a customer logged in the first time, he/she would keep coming back, logging in, spending more and more time with their service. And this was dial-up charges, not the flat-rate hell (for ISPs) that was to come: AOL made a profit for every minute you were online. The math was clear: The lifetime value of an average customer was through the rough, meaning they could turn up their Customer Acquisition Cost dramatically and still make money.

Tell that to Marketing, and they’ll come up with some great ideas! Instead of buying big ol’ boring ads in magazines like the one above and lamely ask people to mail in for a disc, why not produce the floppy discs in ship-loads and bundle it with every other product imaginable? Doesn’t matter if most of those you hit don’t have a modem – or even a computer. If just some of them do, and just some of them tried out product, AOL would make a profit. So said the numbers - and so they hit the button: 300 million disc were produced and bundled with magazines, modems, flowers and frozen hams.

No, I’m not kidding – frozen hams.

With the disc, you got 2 hours of online access for free and you would be AOL’s forever – or at least until their service deteriorated.

The discs were so prolific they were nicknamed coasters, as in the thing you place under your cool beer. In the end there was a backlash and AOL stopped the carpet-bombing. But whether you liked the marketing or not, this strategy propelled them to no. 1, and enabled them to steal one of the biggest old-world media companies at the peak of the bubble (a book I can highly recommend, btw).

Oh, and the old joke about the discs: "The directions say 'install and run.' I'm too old to run... should I call the police?"


PS: If you’ve got one of these lying around, it might be worth something today.

Comments (2)

As a 9 year old, AOL was an amazing product. I had a lot of trouble finding anything fun to do with Prodigy, but AOL was a bonanza of text-based MUDs, message boards (!), e-mail, and free games (that were full of viruses).

I stuck with it until the web became worth using, after which I implored my family to switch to the simplistic MSN and then finally to broadband.

To AOL's credit, I doubt anyone could've anticipated the kind of impact that the web would eventually have.

Weirdly enough, Apple seems to be (successfully!) replicating AOL's closed business model with the iPhone and iPad. Funny how history repeats itself.

I remember AOL saved me a small bundle because I stopped buying blank floppy disks--just formatted the AOL freeby instead. That is, until they started sending CD's, which weren't nearly as useful.

Post a Comment