They became the iconic reflective symbol of the 1990s and 2000s: the AOL CDs and disks that cluttered our mailboxes and soon landed in the trash. Between 1993 and 2006, estimates say that AOL sent out more than
1 billion CDs with free trial software.
With the announcement today of Verizon's $4.4 billion purchase of AOL, it's a good time to recall that these hated CDs were a big reason AOL became a juggernaut in the first place.
How AOL used CDs to cover the country
In the early '90s, marketers faced a problem: people didn't know what the internet could offer, so selling them on it was difficult. Commercials could run through the advantages, but for the most part, it was difficult to describe. There was a chicken-and-egg problem, too: without internet access, it was hard to download internet software. This commercial from 1995 shows the burden AOL marketers experienced — they were forced to list off every benefit of the web while also having to explain it:
That was a problem one direct marketing genius sought to solve.
That genius was Jan Brandt, who shared much of her story on a 2014 "Internet History" podcast with Brian McCullough. Brandt came to the company in 1993, after AOL had just IPO'd and still trailed Prodigy and CompuServe as an internet provider. Radical measures were needed to make AOL a market leader, so while Prodigy poured much of its early ad spend into TV, AOL sought a different strategy.
AOL's first significant step into direct marketing was a $250,000 campaign — a nontrivial sum for the small company — that involved sending disks to possible customers. The disks contained a free trial for AOL (usually pegged to a number of free hours online, since usage was paid for by the hour).
It didn't take long for AOL to double down on mailings and expand to new distribution channels. An early campaign gave away free trial CDs in Blockbuster video rental stores, and that showed Brandt that broader channels could be as effective as the mail. From there, AOL was off to the races. Free AOL offers showed up nearly everywhere, including:
- In cereal boxes
- On meal trays during flights
- At NASCAR races
- On seats at the Superbowl
- In packages of Omaha Steaks (the team had to test that freezing and thawing the disk wouldn't damage it)
The company also paid Blockbuster, Barnes & Noble, and other chains to distribute floppy disks and CDs. Later on, it offered a revenue share to computer companies that included AOL software.
All those AOL CDs weren't just annoying. They were massively successful, in part because they were impossible to escape.
AOL's CDs helped make it a dot-com juggernaut
It should be obvious the AOL CDs were a success from the beginning — that's the reason they kept sending them out. As Kara Swisher wrote in the book AOL.com, the targeted campaign launched with a phenomenal 10 percent response rate (usually, a 1 percent response rate would be considered a hit). On the Internet History podcast, Brandt said learning about the high response rate "was better than sex."
Brandt attributes the success to the base appeal of getting something for nothing. "It was my absolute belief that you could not send someone a package in the mail and not open it," Brandt told McCullough. "Part of direct marketing, and a big part of it, is getting people to open your package." Though AOL's campaigns were maligned as indiscriminate spending (often nicknamed "carpet bombing"), the company always knew exactly how much each new user cost. The biggest challenge was expanding the marketing spend to reach more people.
In 2011, AOL CEO Steve Case took to Quora to reveal just how successful all those free trials were. "At that time I believe the average subscriber life was about 25 months and revenue was about $350," Case wrote. "So we spent about $35 to acquire subscribers." Because that $35 had a gigantic return, AOL was happy to keep pumping money into free CDs. Case credits the campaign with lifting the service from 200,000 subscribers to 25 million. Though some of that was because of the rising tide of the Internet, a large part was from AOL CDs and disks.
Those CDs really did take over the country. Marketing manager Reggie Fairchild chimed in on the Quora thread to claim that in 1998, AOL used the world's entire CD production capacity for several weeks. Brandt also joined the thread to note that "at one point, 50% of the CDs produced worldwide had an AOL logo on it. We were logging in new subscribers at the rate of one every six seconds."
AOL CDs left a legacy of litter
As the internet changed, so did AOL's business strategy. The company transitioned from charging for hourly use to an unlimited model, and the rise of broadband further transformed the company. By 2004, AOL was still sending out a lot of CDs, but the massive churn of users was already becoming a problem in a broadband era. Finally, in 2006, AOL announced it was ceasing the CD program.
Was there a backlash to the CDs? Of course. A campaign to return 1 million CDs to AOL in 2002 was just one of the responses. But the backlash only happened because AOL's direct marketing was successful enough to be a major engine behind the dot-com boom.
It can be argued that even as AOL melts into Verizon today, the legacy of the AOL CDs will remain. After all, that junk mail really did help bring America online.