AOL: An innovator playing catch up

NEW YORK, Dec. 9 (UPI) -- U.S. Internet innovator AOL begins a new chapter Wednesday with its disconnect from Time Warner, which is spinning off its $164 billion purchase.

The company that pioneered email, chat rooms, and instant messaging -- previously known as America Online -- was quickly eclipsed by upstart Hotmail in 1996, which offered its services for free and untethered from a specific service, The Washington Post reported Wednesday.

"We didn't find it that hard to out-innovate AOL," Hotmail co-founder Jack Smith said. "With Hotmail, you didn't have to install anything and you didn't have to dial in to a particular service to get your email."

AOL, however, held on to its business model of charging a fee for email services until 2006. By then, millions had switched to other services.

In contrast, AOL spent $40 per user to market its service, while Hotmail simply put a banner that said "Get your free email at Hotmail," at the bottom of every email that was sent, the Post said.

As it is spun off, AOL is reinventing itself, concentrating on publishing Web content, the Post said.