David Cassel (destiny@wco.com)
Fri, 6 Jun 1997 00:45:04 -0700 (PDT)
A b a n d o n S h i p
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Half AOL's members say they're likely to leave the service.
An SVD/FIND survey discovered "the highest defection rate among national
ISPs" -- reporting that an astounding 16% of all current internet users
are former AOL subscribers. ( http://www.prnewswire.com/cgi-
bin/stories.pl?ACCT=104&STORY=/oracle/dbtmp/133451&EDATE= ) The
researchers found that a whopping 8% of AOL's members said they will
definitely leave the service, with nearly 40% more saying they are very
likely to leave the service (or at least somewhat likely.) "It feels to
me like the slumlord has gone off to Vegas with the rent money and left us
to our own devices," one subscriber told the AOL List.
The list of problems begins with AOL's web page servers. "There have been
at least four to five major system outages that have lasted for 10 to 12
hours..." another subscriber told the AOL List. But there's more. "The
FTP server is frequently off now--and of course the mail system has now
gone way beyond being a joke, with mail sometimes not being delivered for
10 to 12 hours or more." They remained skeptical, adding that "if it gets
any worse, soon even the U.S. Post Office will offer faster service." And
the final insult was yet to come. "AOL customer service says they no
longer issue any credit if you can't access your web page or your mail or
anything else for a day or so at a time."
Yet Ted Leonsis flatly asserted to a San Francisco paper Thursday morning
that AOL had fully recovered from its switch to flat-rate pricing.
(http://www.sfgate.com/cgi-bin/chronicle/article.cgi?file=BU60619.DTL&directory=/chronicle/archive/1997/06/05)
Published just hours before the survey was announced, the article finds
Leonsis boasting that "we're ready to grow again." Industry experts
disagree. "I had trouble logging on last night from my house..." an
SVD/FIND spokesperson told C|Net Radio.
(http://www.news.com/Radio/Rams/1997/06/05/ns.ram)
In fact, company cost-cutting has actually aggravated the problem. "My
local lines are once again busy," one of AOL's Community Leader posted --
to alt.aol-sucks. They attributed the change to a surprise new policy
that moved over 30,000 overhead account-holders off AOL's toll-free
lines. (http://msnbc.com/news/77692.asp) "...the reality is that access
is *NOT* what AOL claims it is," another Community Leader told The AOL
List, adding "because of this change, many Leaders are being forced to
quit, because they will not be able to do their jobs." Other subscribers
are noticing the cut-backs in customer support. "At 4:00 pm -- through
6:00 pm -- on 5/29/97, AOL's technical support line gave me the error
'We're sorry, all circuits are currently busy.' "
Problems from cost-cutting beg the question: where DOES the company spend
its money? For starters, in the last six months, AOL mailed their
subscribers at least five pitches for the AOL Visa card--all sent
first-class. ("This exclusive invitation to apply is good until April 7,
1997." "This exclusive invitation to apply is good until April 28,
1997...") The most recent ad even offered subscribers a $38 piece of
luggage!
But still more money is being spent on marketing. In 1996, Steve Case
told the National Press Club "our business model's been consistent for
quite some time...we're willing to spend up to 10 percent of the lifetime
revenue we generate from a customer to acquire a customer." But the
consistency ended months later. This year Case told the same organization
that 20% of AOL's revenue is being spent on maintaining subscriber
totals--and Thursday analysts told the San Francisco Chronicle AOL still
needs to increase expenditures by a fifth.
But the latest cut-backs also reveal a dirty secret: free service to the
press. "Bob Pittman has requested that these influencers continue to be
able to use the 800 number," the in-house memo announced. "The DAY after
I posted that memo Steve Case gets a press award for best online service,"
one community leader told the AOL List. "From all the folks who are going
to continue to get free access. Makes you wonder, doesn't it?"
Indeed. In 1996 the editor of the AOL List contacted a columnist who was
using the free AOL access. "Busy signals are common," Craig McLaughlin
conceded in the San Francisco Bay Guardian--15 months ago--adding
"gateways are so crowded that mail sometimes doesn't make it through..."
But then he took an unusual stance, in a story about a pedophile convicted
on nine counts of child pornography trading. McLaughlin wrote that he was
distressed by reports that on-line activists didn't rally to the
pedophile's defense--partly because the pedophile had been using an AOL
account! Before the article was published, the editor of the AOL List
contacted him about the apparent conflict-of-interest in defending AOL
from a free account. "In the critical moments when the $100 million
marketing campaign should be scrutinized, articles appear stating that
critics are elitist..."
Over a year later, the free-accounts-for-reporters policy remains in
effect, with the less-crowded 800 numbers insulating reporters from busy
signals and access problems. And AOL is determined to squelch dissenters.
"When a Community Leader posted the May 21 memo to that message board, the
entire section, known as a 'folder,' was deleted by AOL officials," MSNBC
reported. "AOL then terminated the Community Leader's account with no
warning."
"Within the staff message boards, Leaders have begun talks about going on
strike, quitting, reporting these actions to shareholders, and even
threatening lawsuits if AOL eliminates their access" one in-house source
commented. The disgruntled staffers will also no longer countenance AOL's
public claims of reliability. "AOL's connection FAILURE rate is now at an
average of 60% per dial-in," a Community Leader told the AOL List. "A
modest improvement over the winter months, but it still sucks."
Still, former staffers in Colorado, sub-contracted to provide customer
support for AOL's members, paint an even darker picture. "Most of the
time when the network went down during peak hours, we were told to say it
was because we were updating the system. It was all bullshit."
What's behind it all? The sub-contractors may have the answer. "We were
told that we had a five year deal with AOL," the Colorado staffer
remembers, "but it never got signed because AOL was bitching about the
money." MSNBC reported that AOL was "hemorrhaging some $14.4 million per
year" as a result of the 1-800 access. Coupled with the dozens of
lay-offs reported last week (http://www.aolsucks.org/list/0056.html),
these events suggest a desperate AOL scrambling to create the illusion of
profitability. A minimal uptick last quarter was attributed to one-time
gimmicks by critics--and the pressure's on. Last year, after announcing a
$350 million debit to cover marketing funded by dubious accounting
techniques, AOL promised to show real profits by the end of June, 1997.
(http://cgi.pathfinder.com/netly/editorial/0,1012,251,00.html) Ripples
are being felt across the system. "Virtual postcards that we could send
FREE...are now replaced by a PAY postcards," one subscriber complained.
This lends new credibility to a February New York Times story: reporter
Seth Schiesel discovered AOL was concealing additional phone numbers
during the peak of their access crisis--because they would cost AOL more
to operate. (http://www.nytimes.com/library/cyber/week/021097aol.html)
In fact, some watchers wonder if AOL has institutionalized a level of
irresponsibility. Last year AOL faced a tough question at the National
Press Club--"America Online has goofed in its billing practices," one
audience member announced. "What are you doing about this management
problem?" Steve Case responded, "Well, we've probably goofed in a lot of
things over the past 10 years..." (Meanwhile, the Washington Post reports
that last month yet another robbery took place at the AOL building at
22000 AOL Way.)
With skepticism growing, and studies showing members eyeing the exits, how
can AOL increase their subscribers? A satirical news release suggests the
company's likeliest answer: cloning users from sheep.
(http://www.denounce.com/sheep.html) "When asked why AOL chose sheep for
its cloning efforts, instead of, say, humans, Steve Case, Chairman of AOL,
explained that they couldn't find any humans that were interested in
having their clones using AOL," the tongue-in-cheek parody announced.
" 'Sheep, on the other hand, appreciated the opportunity right away...' "
They've captured the company's arrogance, reporting that next AOL
would clone lemmings, because "They're easier to control, and they do
whatever you tell them." But the satirists may be considering AOL's
little-publicized efforts to dispose of over 40 lawsuits filed against the
company since their move to flat-rate pricing. Industry analysts reported
that more than 80% of phone calls to AOL at the time failed to connect.
(http://www.news.com/News/Item/0,4,10151,00.html) Under pressure from 40
state attorneys general, AOL agreed to offer a one-month credit (or,
alternately, a cash refund) to members who were paying subscribers in
December or January. (http://www.wco.com/~destiny/refund.htm)
Last week AOL agreed to a settlement which merely extends the deadline to
apply for refunds an additional two months--and offers an equally small
refund for service problems in February or March.
(http://www.aol.com/legalnotice). "This settlement...will dispose of the
dozens of AOL class actions currently pending, and eliminate everyone's
rights to obtain significant benefits in litigation from AOL," read a post
by attorney Tammy Medler in an AOL legal bulletin board -- "if the
settlement is approved." (http://www.wco.com/~destiny/objector.htm)
AOL wants to ram the weak settlement through. "We filed a Motion to
Intervene in the lawsuit, and that motion, as I understand it, was pending
when AOL apparently simply ignored us and got the judge to approve the
notices," Medler told the AOL List Tuesday. But resistance is waiting
ahead. "Our clients will be filing vigorous objections to the class
action settlement in Chicago, on the grounds that it does not fix any of
the problems which we complained about in our lawsuits, eliminates claims
which the Chicago lawyers never even pursued, gives the attorneys $3
million for conducting no formal discovery (not one interrogatory, not one
request for documents, not one deposition), and basically gives a meager
recovery to class members."
Ironically, AOL's keyword "Class Action" goes to a window titled "Swiss
Banks." But class members do have a choice. "If they want to object to
the settlement, and have a lawyer represent them regarding the objections
at no charge, they can e-mail me at Objectors@aol.com," Medler says.
"They should include their full name, snail mail address, the AOL plan
which they subscribed to, a statement that they want the law firm of Carey
& Danis, L.L.C. to represent them regarding their objections, and a brief
one or two sentence explanation as to why they feel the settlement is not
fair." It could have a significant impact, Medler points out. "If we get
enough people objecting, we could either destroy the settlement, or
negotiate to get additional benefits for class members."
Over 50 attorneys were involved in the original settlement proposal. In
fact, watching AOL's new commercial, "Heckler's Online" claims to have
sensed an odd moment: the "Awkward delay while Steve Case is served the
Class Action papers." (http://www-new.hecklers.com/interact/TopTen/arch26/oddestsmoments.htm)
But members now have until July 25 to request their credits or apply for
their refunds--as stipulated by AOL's agreement with the state attorneys
general.
A little-noticed provision of that agreement also allows members
subscribed to the one- and two-year pay-in-advance plans to cancel their
accounts and receive full, pro-rated refunds for unused time--even though
each such cancellation could cost AOL hundreds of dollars. That may be
concerning the company. In a startling vote of no-confidence, "insiders"
are getting rid of over half a million shares of restricted AOL
securities. S teve Case himself has sold 100,000--but he's not the only
one. New documents show that, in total, 19 holders sold their restricted
securities--$25 million worth--just in the month of May, including four
company officers, three directors, the company financial officer, and
their president. (http://www.insidertrader.com/1m0597a1.htm)
And yet another content provider -- Nickelodeon -- made a conspicuous
expansion to the web (http://www.news.com/News/Item/0,4,11173,00.html)
Like the Motley Fool, Heckler's Online, Barnes and Noble, and The Knot,
Nickelodeon will also maintain an AOL presence, though a flood of AOL
content providers abandoned the service entirely last year (Wired, USA
Weekend, Omni, House of Blues, the San Jose Mercury News, NewsBytes,
Atlantic Monthly...) This raises the question of who's leaving
quicker--AOL's content providers, or their subscribers? "The lack of
loyalty is really startling," an analyst at Arlen Communications told the
Atlanta Journal-Constitution's Art Kramer.
Just the 8% who told SVD/Find they would definitely leave the service
constitutes over a half a million users. Making matters worse, C|Net
reports that the departing users represent the demographic groups crucial
for attracting badly-needed advertising money to the service. Rose
Aguilar reports on C|Net Radio that "once the perfect subscribers leave,
the advertisers follow"--making profitability even harder to come by?
(http://www.news.com/Radio/Rams/1997/06/05/ns.ram)
Who's left? A controversial Ku Klux Klan recruiter, for one. When public
pressure mounted from the Anti-Defamation League, AOL announced that
"We're constantly reassessing our policies."
(http://www.news.com/News/Item/0,4,9467,00.html) Two months later, the
Klan page has apparently passed muster.
THE LAST LAUGH
Communications Daily recently uncovered how hard it is to remain loyal to
AOL. They reported that while appearing as the guest in an on-line chat
session, the President of the United States Telephone Association was
bumped from AOL--and couldn't get back on.
15 minutes later he gave up using AOL's software to answer the
questions--and began using his telephone.
David Cassel
More Information - http://www.wco.com/~destiny/time.htm
http://www.wired.com/news/business/story/4289.html
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