Is Apple the New AOL?

Now that Apple is, by a hair, the most valuable technology company in the world, we can expect critics to redouble their heavy-lies-the-crown type take downs of the company's tight control over its products.

Joe Wilcox, channeling a few other writers, argues that Apple is the 21st century version of AOL: closed, claustrophobic, and utterly doomed. He sums up the case this way:

Apple is the new AOL because of iPad, which offers a safe, easy way to consume content without venturing out onto the vast Information Superhighway. Like an earlier computing generation, iPad users (hereafter referred to as iPadders) can travel the Infobahn's slow lanes.

It's true that Apple eschews the Open Web and prefers to create a walled garden for its consumers, filled with apps and programs that must play by Apple's rules. Slate's Jack Shafer reached the same conclusion when he, channeling Cory Doctorow, called the iPad

a dumbed-down, sealed-shut device designed to make its owners into passive consumers. The cheers for the iPad's alleged simplicity, [Doctorow] declares, remind him of the way some people talked admiringly about AOL in its salad days. They said AOL's simplicity and wholesomeness would trump the chaos and perversity of the Web, a prediction that flopped, he notes.

It's possible -- actually, it's probable -- that Apple will eventually lose ground to another company that produces better mobile devices like phones and tablets, with higher quality service and a freer app ecosystem, for less money. The rise and fall of tech giants is the nature of the industry. (Google execs sometimes say that the company that surpasses Google on the Web likely does not exist yet, which is presumably evidence of humility rather certainty that such company will never actually "exist now.")

But the AOL comparison misses something big. AOL's economic motor was paid subscriptions. But 1999's meal ticket petrified in the 2000s when Internet users realized they didn't have to subscribe to the Internet. Check out this graph of AOL subscribers below. Between 2001 and 2009, AOL's subscriber base fell from 26 million to 6 million.

There are at least two reasons to think Apple won't suffer a similar exodus. First, AOL offered access to Internet services that eventually became free by default on the Web. Apple also sells access to an app kingdom, but first it sells hardware -- many kinds of hardware, from desktops to tablets to phones -- and hardware costs money, period.* That means Apple is hedged and diversified in a way AOL was not.

Second, Apple's "velvet prison" (to use Shafer's beautiful term) isn't as crucial to its bottom line as a paywall for the Web was for AOL. Whereas AOL required wrenching change to rebrand itself as a content creator rather than service provider, it wouldn't take much for Apple to say, "OK, we'll run Flash now" or "Fine, we'll accept porn apps," or "Sure, we'll soften our requirements for developers." Fierce competition from Google's Android phones, which collectively started outselling the iPhone earlier this year, should keep Apple's products nimble in a way AOL was not.

To be sure, I have no idea what the next revolution is. It's possible that some technology will come around that explodes the paid-app model, obviates the need for expensive smart phones and tablets, and delivers lightening-fast Internet on a wicked cheap, super-mobile, ad-supported device as yet unconceived. But that moment, to the extent it even happens, feels far away. Until then, get used to Apple wearing the crown.
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*In the spirit of thinking futuristically, maybe in some distant future, complex computer hardware will be free and we'll pay for computers the way some of us pay for new cell phones: service will be pricey but every year our Apple contract will allow for, say, a new iPad...