Back in the day [read: the '90s], free AOL installation CDs were virtually inescapable, thanks to AOL’s aggressive use of unsolicited direct mailing and the company’s efforts to get them in free bins at stores and public places everywhere. Proclaiming some number of free hours of cutting-edge dial-up subscription service, a good number of them would wind up in the trash or tossed around as makeshift Frisbees.
But for all of the annoyances caused by these disks, former AOL executives say they did what they were supposed to do: Give the company a huge install base, such that even today, 40 percent of AOL’s revenue comes from dial-up subscriptions. How much did it cost to get there?
AOL’s former CMO Jan Brandt tells TechCrunch that the disks cost more than $300 million; maybe even more shockingly, “At one point, 50% of the CD’s produced worldwide had an AOL logo on it.” But AOL was happy with the investment: At its peak, it logged a new subscriber every six seconds, she said.
Writing on Quora, former CEO Steve Case further explains the strategy behind AOL’s install disk blitzkrieg:
[I]n the early 1990s our target was to spend 10% of lifetime revenue to get a new subscriber. At that time I believe the average subscriber life was about 25 months and revenue was about $350 so we spent about $35 to acquire subscribrs. As we were able to lower the cost of disks/trial/etc we were able to ramp up marketing. (Plus, we knew Microsoft was coming and it was never going to be easier or cheaper to get market share.) When we went public in 1992 we had less than 200,000 subscribers; a decade later the number was in the 25 million range.