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Technology Stocks : America On-Line: will it survive ...?
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To: Ramsey Su who wrote (1712)2/13/1997 4:48:00 PM
From: Joel Sternberg   of 13594
 
>James, a number of posts ago, someone accused AOL of running a ponzi scheme. This is totally
incorrect. A ponzi scheme is someone selling nothing while promising and delivering a fantastic yield by
using new investor money to pay for the old.<

You misunderstood or forgot my Ponzi scheme analogy. AOL is not running a Ponzi scheme, it is a Ponzi scheme. The stock rises because they continue to grow the membership numbers, even though they are unable to stay the losses. However, as the membership gets larger, they have to spend more and more on advertising to overcome churn and continue their growth. At some point, the whole house of cards must come crashing down, either because membership starts declining or the cash fueling the advertising dries up. Poof!
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