Nexus

The Apple and the Garden that was AOL

How AOL's Steve Case Was Ahead of His Time

iphones

When AOL merged with Time Warner a decade ago (in what amounted to a well-timed “coloring in” of casino chips by the dial-up Internet behemoth), AOL’s chairman Steve Case explained that the deal would bring together a tech giant and a media conglomerate for the first time. As The New York Times then reported: “The America Online-Time Warner merger will create a powerhouse for the next phase of Internet business: selling information and entertainment services to consumers who may tap into them using digital cell phones, handheld devices and television set-top boxes in addition to personal computers.”

You know the rest of the story:  Case’s vision has been fulfilled indeed. Unfortunately for him and his former colleagues at Time Warner, who’d rather forget AOL was ever on their letterhead, Steve Jobs is the one who engineered this brave new world. That’s why Apple has overtaken Microsoft as the world’s most valuable tech company, with a market capitalization of $282 billion (up from $16 billion in January 2000 when Apple was a struggling PC maker past its prime and AOL announced its merger with Time Warner). AOL Time Warner, for those of you keeping score, was worth about $240 billion in its heyday; the combined market capitalization of the now divorced couple amounts to only $38 billion.

It’s not even that Apple needed the same elements that Steve Case and former Time Warner CEO Gerald Levin sought to leverage. Apple doesn’t control the Internet’s pipelines, own movie studios or tell some 26 million paying subscribers when they have mail (as AOL did in its heyday).

No, the common thread in the Jobs/Case worldviews is the notion of a privatized cul-de-sac off the World Wide Web that consumers prefer over the open Internet. The conventional wisdom surrounding the failure of the AOL-Time Warner merger is that AOL by 2000 was already a quaint anachronism – not only because the online service continued to rely on dial-up, but also because it sought to be a destination unto itself, when most subscribers no longer had much reason to  linger in the walled-off garden. As Gerald Levin himself later put it: “The transaction was undone by the Internet itself.”

Apple’s success suggests that Case may have been ahead of his time instead of behind it, vindicating the model of proprietary online space that seamlessly manages consumers’ communication and entertainment needs.  Jobs did so not by seeking to own content or cable wires, but by reasserting the importance of hardware – Apple always refused to buy into the conventional wisdom that machines had become indistinguishable commodities. The interaction between all those iThings and Apple’s iTunes store has created the ultimate walled-off garden for consumers to frolic in a state of post-Internet innocence, relying on an array of Apple-blessed apps. In announcing Apple’s best quarter ever a week ago, Jobs chided Google for its “fragmented” Android phones, contrasting them to Apple’s more “integrated” system.

This was no casual aside, but a statement of principle. Integrated versus fragmented sure sounds better than the familiar “closed” versus “open” contrast, especially if you are decidedly not in the open camp. To be clear, Jobs went on:  “Even if Google were right and the real issue is closed versus open, it’s worthwhile to remember that open systems don’t always win.” He went on to say that the real issue is “what’s best for the customer.”

Walk into any one of Apple’s stylish retail outlets and it’s easy to witness how much customers like “integrated.”   We like it when our machines play well together, can easily download content we want and don’t crash. If there’s an app for it, all the better.

Most independent tech enthusiasts, however, don’t like where all this integration is headed. To borrow from Jobs’ lexicon, they worry about the fragmentation of society (both virtual and physical) that ensues from the balkanization of the Internet, and the defection of users to walled-off communities, including not only Apple’s app universe but such social networking sites as Facebook (which Apple could acquire with its formidable cash horde, as bloggers were quick to note upon hearing of a Steve Jobs-Mark Zuckerberg dinner).

The Economist and Wired magazines have recently featured cover stories proclaiming the demise of the World Wide Web. In his article, Chris Anderson, Wired’s editor-in-chief, described the move from the wide-open Web to “semiclosed platforms” as one of the most important shifts in the digital world. The shift is accelerating with the rise of mobile computing, and its reliance towards specialty software, such as apps, designed for a single purpose.

Jonathan Zittrain, one of the leading Internet thinkers, warned of this shift – a counterrevolution, he called it – in his 2008 book “The Future of the Internet – And How to Avoid It.” For Zittrain, the danger is a return to an “early model of bundled hardware and software created and controlled by one company,” and the loss of a “generative Internet that fosters innovation and disruption.”

Building on Zittrain’s work, Tim Wu (the author of the “net neutrality” concept, a forthcoming Zócalo guest, and a colleague of mine, I should disclose, at the New America Foundation) is about to publish a cautionary tale entitled The Master Switch: The Rise and Fall of Information Empires. He recounts how other game-changing information technologies such as telephony and radio also went from their pioneering and wide-open euphoric stages to an innovation-stifling commercial consolidation phase. It is not clear whether the Internet will go the same way; it is a medium far harder to control from the center, though the stakes are higher than with other media, given that we rely on the Internet for almost all our information and communications needs.

In Wu’s tale, Apple is the builder of alluring Trojan horses for those who would rob us of a wide-open common Web that fosters innovation. Perhaps, but those horses are so pretty and advance such convenience, as even Wu concedes, that advocates of a more open or fragmented online universe, will have to work harder to convince the rest of us of the dangers of a seamless marriage of Hollywood content, AT&T’s lines and Apple’s cool hardware.  Most of us disappoint activists for an open-sourced Internet by simply desiring reliable, well-designed gadgets and systems that do what they are supposed to do, even if they don’t require (or accept) much from us. Heck, some of us even held onto our AOL email accounts.

Andrés Martinez, the editorial page editor of the Los Angeles Times from 2004 to 2007, is an associate editor of Zócalo and the director of the Schwartz Fellows Program at the New America Foundation.

Reserve a seat for Tim Wu’s talk at Zócalo here.

*Photo courtesy Yutako Tsutano.