×

Once registered, you can:

  • - Read additional free articles each month
  • - Comment on articles and featured creative work
  • - Get our curated newsletters delivered to your inbox

By registering you agree to our privacy policy, terms & conditions and to receive occasional emails from Ad Age. You may unsubscribe at any time.

Are you a print subscriber? Activate your account.

AMERICA ONLINE PULLS BACK MARKETING PROGRAMS, NEW SERVICES POSTPONED UNTIL GLITCHES ARE FIXED

By Published on .

America Online is putting marketing plans and new services on hold as its focus shifts from luring new members to calming existing subscribers frustrated by major technical glitches.

The popular online computer information service, often acclaimed for its user-friendliness, has seen its subscriber base double to 600,000 since last summer. But with those new users has come a crushing bumper-to-bumper gridlock on the system that has angered many veteran subscribers.

The problems are so severe that America Online President Steve Case announced in an online message to subscribers last week that he is postponing some planned marketing programs and new services "to give us time to catch up with the better-than-expected success of our past efforts ... In the future we plan to err on the safe side when projecting demand."

In an interview with Advertising Age, Mr. Case said a direct mail effort and other independent direct marketing programs planned for February will be postponed for several weeks. Joint marketing programs like packaging tie-ins with computer marketers will continue, he said.

"We didn't want to throw more fuel on the fire," Mr. Case said. "If we're not providing consistent quality while we're pursuing new customers, it angers our current subscribers."

Mr. Case said he expects subscriber growth to continue and still believes America Online will reach the 1 million mark by this fall.

"These kinds of problems are difficult and trying, but we'll get through them and we'll get through them fairly quickly," he said.

Still, frustration among existing subscribers is growing daily.

"Every time they put out a press release trumpeting their `astonishing' growth rate, the service seems to slow down even more," wrote Kevin Howard of Westlake Village, Calif., in an electronic mail response to a question posed by Advertising Age.

"My major difficulty has been with being able to log on to the service. Most nights between 5 p.m. and midnight it is virtually impossible to complete a log-on sequence," said Mr. Howard, a subscriber since 1989. "Numerous times when I have been able to log on, the system has crashed or parts of the service are unavailable to me."

Among the messages users have been seeing when they try to log on is "America Online is experiencing a time-out. Please wait a few minutes or try again later." But successfully logging on doesn't guarantee access to America Online. Several users report being booted out of the system for no apparent reason.

User gripes have become hot topics of some of the America Online special interest forums.

One subscriber wrote: "More users than ever. The core group gone to hell, or just gone. Delays. Breakdowns. All signs of a growing medium. On the grand scheme, nothing wrong that a little technocash won't fix? Right?"

Mr. Case said services to be postponed include access to Internet News Group discussions, originally slated to be available to subscribers in late January. A deal with Shoppers Express, the nation's largest shop-at-home company, to provide interactive home grocery and pharmacy delivery service to America Online subscribers, is not affected by the service delays, he said.

The Shoppers Express venture is scheduled to begin this spring and will allow subscribers to electronically order groceries or drugstore-related items (including prescriptions) 24 hours a day, seven days a week. The service will be tailored to local area residents being serviced by Shoppers Express' retail partners, including Safeway, Kroger Co., Winn Dixie Stores, Albertson's, Hook-SupeRx and Eckerd Drug Co.

The technical crisis at America Online comes at a critical time. Online computer information services are gaining in popularity and a slew of competing services are being developed.

America Online has responded to the problems with an around-the-clock effort to rewrite system software to accommodate the increased user load.

"The root of the problem is fairly simple: Demand has been exceeding supply. At peak usage times, more people want to use America Online than we are able to serve," Mr. Case said in the letter to subscribers.

He also announced a new policy-certain to be controversial-that will lock out many subscribers during peak evening hours.

"We are working to expand the available capacity, but in the meantime, in an effort to provide the people who do get on with a better quality service, we decided it would be better to let fewer people connect to AOL at peak times," Mr. Case said.

"What that means is that after you connect to your local access number you will sometimes be turned away by our host computer in Virginia at the point in time you would normally be asked to enter your password."

In recent weeks America Online has been turned off regularly in the early-morning hours to allow engineers to install new software.

"We are rewriting software through the night and morning, and we have to take the system down to install it," an America Online spokeswoman said.

"We are intensely focused on this problem in the company right now," the spokeswoman said. "It is our number one priority. We absolutely believe our users will see improvements over the next couple of weeks and we'll be out of the woods in the next 60 to 90 days."

America Online would not reveal the system's current simultaneous user capacity but analyst Joshua Harris said it's only about 10,000 users. The appropriate ratio of subscribers to simultaneous users should be about 40 to 1, or, in America Online's case, about 400,000 total subscribers for the current 10,000 capacity, said Mr. Harris, president of Jupiter Communications, New York.

"It's a serious problem. Once you make subscribers unhappy it's hard to make them happy again," Mr. Harris said. "It's a nervy period. But how can you get on their case because they grew faster than they planned?"

Mr. Case said America Online needs to increase simultaneous user capacity by at least 15% to 20% "to eliminate the problem."

"This is not a problem that affects most of our members," he said. "The problem is during peak usage hours."

Mr. Harris doubts America Online will be able to solve its problems as soon as it claims.

"They are rewriting the code, and that's not a trivial thing. They can put in a new computer but the software has to be able to handle the load," he said.

Mr. Harris said America Online's difficulty is just the opposite of Prodigy, its online competitor. He said Prodigy, with 2 million members, has a user capacity of 16 million.

"Prodigy went too big and AOL went too small," he said. Services like CompuServe and Genie, because they also perform other data processing services for large corporate clients, are better able to expand ahead of demand, Mr. Harris said.

"It's not their fault that they grew faster than they planned," Mr. Harris said of America Online. "They are a small company. They don't have the deep pockets of the Prodigys or Genies. They have to toe that fine line and sometimes it catches up with you."

Mr. Case said America Online's growth rate won't slow, but "it's just not going to speed up."

Prodigy executive Scott Kurnit said America Online's growing pains may provide a boost to other online services as the industry sees "dramatic growth this year.

"I think it will naturally be to our advantage because we have built a system that can handle millions of users," said Mr. Kurnit, exec VP-consumer products, marketing and development. "When you log on to Prodigy, you get in. That message will be quite clear to the public."

Prodigy in fact used its new "Live on Prodigy" campaign to take advantage of America Online's plight last week. A TV spot that aired during prime-time programming-peak user time for online subscribers-touted Prodigy's ease of access compared with competitors. America Online wasn't mentioned directly,

Most Popular
In this article: