AOL's "Dirty Little Secret": 60% of AOL's Profits Come From Misinformed Customers [UPDATE]

UPDATE: This post originally assumed that all of AOL's subscribers received dial-up. According to AOL's corporate communication office, there are various plans offered and dial-up is not included in all of them. However, AOL declined to say what percentage of subscribers did not receive dial-up.

Ken Auletta's big New Yorker piece on AOL (subscription only) this week revealed an interesting detail about the company's inner workings. According to Auletta, 80% of AOL's profits come from subscribers, and 75% of those subscribers are paying for something they don't actually need.

Auletta lays out how this works:

The company still gets eighty percent of its profits from subscribers, many of whom are older people who have cable or DSL service but don't realize that they need not pay an additional twenty-five dollars a month to get online and check their e-mail. "The dirty little secret," a former AOL executive says, "is that seventy-five percent of the people who subscribe to AOL's dial-up service don't need it."

So a full 60% of AOL's profits come from mostly older misinformed customers who don't realize that they don't need to subscribe to AOL to get online. Although the number of subscribers has sharply decreased from thirty-five million in 2002 to just over four million today, that is still a hefty number of confused people getting nothing for their money.

This may not be a scam, as Business Insider mistakenly suggested this morning, but it does seem to suggest that AOL could be doing more to keep their customers informed about the service they provide.

Business Insider also provides a helpful set of screen grabs to show customers exactly how to unsubscribe with the suggestions that the reader "Email This Post To Your Parents And Grandparents To Make Sure They Aren't Paying AOL When They Don't Have To."

Comments

[1worldaddy]

12:07 AM on 02/11/2011

Yeah this whole join forces with AOL thing smelled like crap right off! Looks like another chapter in my boomer life that I will look back on and say how cool it used to be in the day. Things turned a little wierd here when they took control over who can edit comments.I initially refused any stunking "badges" then my ego coaxed me into accepting one "badge" so I guess I'm drinking the kool-aid.
If the whole shebang starts to tilt to the conservative side it will not suprise me. Kinda sad, like the day Rupert Murderthetruthdoch bought the WSJ.

[FREE-FUNDRAISERS]

08:35 AM on 02/08/2011

Interesting,

With recent announcement that AOL was purchasing Huff, this seems to be an untimely subject given AOL derives most of the profits off the backs of the nieve internet users. As one of the original AOL subscribers, and with other dial up services to choose from other than AOL over the years, few offered a significant savings over AOL's dialup, so not a big deal back then.

As I see it now, if a senior, as this article used as an example, and they have cable or phone, both broadband and DSL cost more than dial up, so I really don't see the value of this article and warning to senior market. With both costing an average $40. per month, why is someone who is paying $25. to read emails going to pay $40. for faster speeds when dial up is more than adequate for most seniors. Of course now there are better dial up deals for same service at less than half the $25. price used in article, and if one has a phone line, which most seniors still do, then a dial up service for $9.95 would be better served to educate seniors about.

I promote nothing but money saving strategies, not only to seniors, but for everyone trying to survive this deep recession and economic collapse, there are hundreds of strategies to choose from, you just have to research them all.

FREE-FUNDRAISERS.com

[Chris Erb]

04:50 PM on 02/07/2011

Removed my post for caps locks?

[JujuBean0586]

07:09 AM on 02/07/2011

This is so funny....my Aunt was doing exactly this.

She had AOL Dialup then she got Bellsouth aka AT&T DSL and every time I went to her house she would open AOL to get online. I told her you don't need that, just open your browser, you are always online.

She screamed at me, and said I need it to get online. I disconnected from AOL and opened her browser and showed her she was still online. After my unlce's schooled her about DSL she finally let it go.

She would literally wait for the funny looking yellow figure to run across her screen, and wait for the little "youve got mail" tone. After she looked at her bill carefully, she realized it and canceled it.

I never knew this was happening to so many people.

[derekc06]

02:02 AM on 02/07/2011

"Huffington Post's 'Dirty Little Secret'" is what it should say.

[unwashedmasses]

01:43 AM on 02/07/2011

Yea!!! We can now call them HUFFINGTON POST.

Thank you Arianna, thank you Koch brothers!!!

[Eileenla]

08:25 PM on 01/26/2011

When I tried to cancel myAOL account a couple of years ago, the credit card number I had given them had changed to a new number. They were billing the new number, but refused to cancel my account unless I could provide them with the old number. When I asked for a supervisor they gave me a phone number to call that turned out to be a porn hotline. It took major persistence to finally get rid of the charges.

[RedStateCenterLeft]

08:39 AM on 01/25/2011

Unfortunately, I still travel to those corners of the U.S., mostly the rural West, where dial-up can sometimes be the only thing you can use. Even tougher, sometimes even an 800-number won't work. It's getting better every day, however, and I expect that I'll be going off dial-up AOL soon enough. I've been an AOL subscriber since 1990 and even once got through directly on the phone to Steve Case to hear my complaint about lack of access. Funny how it's all changed in a generation.

[NVEnvy07]

02:50 AM on 01/25/2011

You've got a scam!

[mulchor]

11:28 PM on 01/24/2011

I signed up to AOL because I was moving, and was unsure if I could get broadband very quickly where I was moving (I was taking a 1-yr visiting position at Washington State out in the boonies). It was murder trying to get them to cancel. I eventually canceled the credit card to get it to stop.

[Mulout]

12:06 PM on 01/25/2011

I had the same problem, it took six months of effort to get AOL to stop billing my credit card. But why is it that I should have to argue with AOL? Why can't I go to my credit card site and check off some box that says 'DON'T PAY xxxxxxxx'? This is something that congress should be addressing and they would if they were not a bunch of wimps on one side and bums on the other.

[cory roth]

07:59 PM on 01/24/2011

when i sent this link to mom mom on gmail i got a return email saying "Technical details of permanent failure:
Google tried to deliver your message, but it was rejected by the recipient domain. We recommend contacting the other email provider for further information about the cause of this error. The error that the other server returned was: 550 550 5.1.1" ...did AOL block the sending of this?!?

[Carolab]

02:47 PM on 01/24/2011

Can't believe so many people don't know this yet.  So many people who aren't tech savvy and being taken advantage of.

7 Best Free Email Clients: Free Replacement for Outlook
By Ishan on January 19, 2010

http://www.ilovefreesoftware.com/19/articles/7-best-free-email-clients-free-replacement-for-outlook.html

I just use Yahoo and have for a long time now.

[O K Ali]

02:19 PM on 01/23/2011

I had to convince the rep that I was going to prison for the next 2 to 5 years to get out of my contract. Did a damn good job, I should have taped the conversation.

[onenvrnos]

08:13 AM on 02/10/2011

Thanks for my morning laugh! Too funny!

[kd1s]

01:42 PM on 01/23/2011

A lot of it is the marriage to the email address. Whenever I run into someone still using AOL and they have a broadband connection I immediately explain they can download and install a freebie, keep their AOL email and IM names, and not pay a dime.

[quadeddie]

10:59 AM on 01/23/2011

Instead of just taking the word of an exec, Lila, can you put this in context of their SEC filing and report on how this 60% number can be possible?

http://www.sec.gov/Archives/edgar/data/1468516/000119312510245249/d10q.htm (attn pg 10)

Either that former exec is wrong (or taken out of context), or AOL is misrepresenting themselves on their SEC filing. Which is it?