America Online's Tenuous Relationship with Microsoft

Strategic Insights -

Despite being an industry powerhouse with 16 million members, America Online is still wary of stirring Microsoft's wrath, according to internal documents and testimony from the company's senior executives. As the world's largest Internet service provider, America Online has repeatedly taken a cautious approach to business ventures that could upset Microsoft, opting instead to work with the software giant to maintain a fragile détente.

Key Takeaways:

  • America Online's senior executives are still constrained by Microsoft's dominance in the industry, according to testimony from David M. Colburn, a senior vice president at the company.
  • The company has a history of pulling back from new business ventures that could upset Microsoft, including a proposed partnership with Sun to build a personal computer that used no Microsoft software.
  • America Online's corporate communications executive, Kathy Bushkin, wrote in an internal document that the company needs to "continue working with Microsoft wherever we can" to manage reality and avoid Microsoft's wrath.
  • The company has developed a code-named project called Apollo, which aims to create a comprehensive desktop application that could compete with Microsoft's offerings.
  • Investment bankers hired by America Online advised the company to move aggressively against Microsoft by extending the Netscape browser and bundling it with communications and productivity applications.

Statistics:

  • 16 million: The number of America Online members at the time of the article.
  • 20 minutes: The time it took for Robert W. Pittman, America Online's president, to respond to Stephen M. Case's email suggesting that the company could support Netscape and gain browser share momentum.
  • "$X": The amount of money spent by Microsoft on its campaign to turn the rest of the industry against Netscape (exact figure not provided in the article).

Sources:

  • "America Online Said to Be Afraid of Microsoft," The New York Times, November 1997
  • Testimony of Kathy Bushkin, America Online corporate communications executive, during Microsoft's antitrust trial
  • Memo from Kathy Bushkin to America Online executives, titled "Microsoft Relationship"
  • Memo from Stephen M. Case to America Online executives, discussing the Netscape deal and strategy
  • Investment bank analysis, advising America Online to move aggressively against Microsoft