Compuserve was an online service for dialup modems from the 1970s to the 1990s. It was a way of getting online and communicating with others before the Internet was generally available to individuals. Later, it became a primary way for individuals to connect to the Internet, turning itself into an Internet Service Provider. But over time, it faded away into history. Here’s what happened to Compuserve.
Compuserve’s sale in 1998
As Compuserve approached its third decade, it struggled to compete with AOL, which offered lower pricing and a nicer graphical user interface. Not many people know this, but Compuserve’s parent company was H&R Block, the tax preparation company. H&R Block bought Columbus Ohio-based Compuserve in 1980 for $20 million to get a nonseasonal business to offset its tax preparation business.
But by 1997, Compuserve was having trouble making money. So in 1997, H&R Block put the division up for sale, but it wanted the right deal. One offer was too highly leveraged. AOL made an offer but it was too stock-heavy, and H&R Block wanted a higher quality stock. AOL in 1998 was a big deal, but it was clear even then that dialup Internet’s days were limited. Then along came Worldcom.
Worldcom came along in early 1998 with a plan. Worldcom wanted Compuserve’s network, but not the service. AOL wanted the service but didn’t need the network. So Worldcom bought Compuserve for $1.2 billion in stock, then sold the online service portion to AOL. H&R Block immediately sold the Worldcom stock for $1.2 billion, which was good. Four years later, Worldcom became mired in an accounting scandal and filed for Chapter 11, becoming the largest bankruptcy in corporate history. As bad as AOL stock turned out to be, Worldcom would have been worse.
Why H&R Block was willing to sell
Compuserve was the undisputed market leader in the 1980s. In 1990, it had 600,000 subscribers. Prodigy, backed by IBM and Sears, came along in the late 1980s with a graphical user interface that made it easy to use. H&R Block held off the challenge from Prodigy the way it held off challenges from AT&T and General Electric. But it was AOL releasing its eponymous product in 1991 that knocked Compuserve off its throne. With a lower price and more people to talk to, Compuserve was going to have a hard time competing. Indeed it did. By 1997, AOL had 8 million subscribers to Compuserve’s 5 million, and Compuserve lost money in 1997.
Selling out in 1998 made sense. Compuserve originally cost $20 million, so $1.2 billion was a good return on investment on something it had owned and profited from for 18 years. Turning the business around was unlikely. In 1998, few people had cable or DSL modems, but it was no secret in 1998 that the future of telecommunications was going to be Internet access through cable or DSL, and that dial-up online services would seem quaint. It was a good ride, but any competent analyst in 1997 would have said the ride was about over. AOL in 1998 was a juggernaut. It was clear this business model was fading, and the investment it was going to take to unseat AOL wouldn’t be worth it.
What happened to Compuserve under AOL
AOL operated Compuserve as a value brand and a separate service, emphasizing its focus on Compuserve as an ISP, rather than a standalone service. What remained of the old standalone service became web forums and a web portal. The Compuserve forums retained a small following until they shut down on December 15 2017. AOL let the business wither as the ISP business focus shifted toward DSL and cable. It didn’t update its client software, but also didn’t formally discontinue much. Compuserve.com still exists, operating under Verizon’s Oath subsidiary, the merger of AOL and Yahoo.
Even though most people who remember Compuserve and used it prior to the Internet probably haven’t thought about it in years, Compuserve never completely away. It just faded into obscurity without a proper goodbye.
Compuserve deserved a proper goodbye
Compuserve’s being left to rot is a bit of a shame. For many people, Compuserve or one of its competitors was their first online experience. Yes, some of us were using e-mail and message boards long before 1993, when the World Wide Web put the Internet on the map and turned it into a destination. In fact, I was a Compuserve subscriber until 1996, because for a time, there were things on Compuserve that weren’t available via the Web yet.
Compuserve was founded in 1969 running on a time sharing system and by the 1980s it provided an Internet-like experience, with message boards (the predecessor to Compuserve Forums), shopping, file transfers, online games, and e-mail. It was expensive, because you connected and paid by the hour. Depending on where you lived, it could cost anywhere from $5 to $36 an hour. But those who could afford it used it just like we use the Internet today, just in more moderation since it was easy to rack up a monthly bill of hundreds of dollars if you used it a lot.
What it looked like
For most of its existence, Compuserve was text-based. Users typed commands to make it do things, similar to a DOS prompt. Most commands then brought up a series of text menus. You connected with a dial-up modem and a terminal program. Power users often developed macros to give shortcuts to their favorite areas.
In the 1990s, as demand for the Internet grew, Compuserve started offering Internet access. It also created graphical front-ends to make the service friendlier and easier to use. The old service retained the name Compuserve Classic.
Today, it seems absurd to pay several dollars an hour to do what Compuserve lets you do. But 30 years ago, it was revolutionary. For a few hundred thousand subscribers, it provided an immersion into the future and made the world a smaller place.
From that perspective, what happened to Compuserve is a bit sad. Today its most enduring legacy is probably the GIF, a cross-platform graphics format it invented in the 80s that remains popular today mostly because it supports animation.