Apple was using General Electric Information Services for their service called AppleLink. The success of AppleLink prompted them to consider offering a served of their own aimed at reducing customer support expenses.
Case moved to Californian for three months in 1986 to convince Apple to let Quantum build an online service for them.
Case's strategy was to take advantage of the decentralized management system that Apple had. He got his wish in 1987 when he was given the go-ahead on the project. Quantum would create and run the online service for the Apple II and the Mac, which would be introduced later. Quantum was also given permission to use the Apple logo to promote the service. Quantum had to use the strict design standards of Apple to make it look like it was an Apple product. Apple helped market it and received a 10 percent royalty from all users. Quantum's income would come from running the service.
Quantum and Apple had many problems before the service launched. Apple made many demands regarding the design of the interface, placement and the way the logo was printed and a large customer service department. Quantum wanted to bundle the new service on new computers or make it available through direct marketing. Apple disagreed with giving away software.
AppleLink Personal Edition debuted in the summer of 1988 at the Apple Fest conference. The service had a $35 annual fee and a $6 per hour nighttime and $15 per hour daytime rate. The service attracted tens of thousands of customers but problems continued between Quantum and Apple.
Quantum decided to end the relationship with Apple. The agreement that Case had signed allowed Quantum to use the Apple logo so Apple could not market any other online service using the Apple logo without Quantum's permission.
In June of 1989 Apple paid $2.5 million for Quantum to relinquish rights to the logo. On October 2, 1989 Quantum changes the name of the service from AppleLink to America Online but retains Quantum as the name of the company. The service was nicknamed AOL because Case noticed that most of the well-known companies had three letters in their abbreviations. Also AO sounded too much like BO an internal newsletter joked.
The new AOL service included games, e-mail, chat, news, forums, travel and other information. One hour of access was $5.95 after that it was $10 for weekdays and $5 for weeknights and weekends. The first 25,000 charter members were offered one month free and a 20 percent lifetime discount.
After separating from Apple, Quantum was free to market the service how they wanted. Quantum gave away the software at first and placed it in magazines and other unusual places.