Hi AOL-ers (A)ficionados, (O)bjectors, and (L)urk-ers:
The following is a crude synopsis of the rise and fall of the "on-line service" business in America in the latter part of the 20th century. Please feel free to post corrections, as the following is from (fuzzy) memory. This is only opinion, results may vary:
In the beginning, there was the on-line service, and its name was CompuServe. (There might have been earlier ones, but I wasn't paying attention).
Next came Genie and Prodigy. (Or it might have been Prodigy and Genie). Delphi was in there somewhere, too.
And then there was America On-line! (Yay!) (NASDAQ, AMER, later NYSE AOL), and there was much (Motley Foolish) rejoicing.
And then there was MSN courtesy of MSFT, followed with tons of grumbling to the FTC from CompuServe and AOL that they would be unable to compete with Mr. Bill.
And then there was the * * * INTERNET * * * !!, actually, the graphics-based Web, (ta-da, or is that, uh-oh), and very few saw the beast until after it had arrived and began consuming them.
Somewhere along the way, Delphi, Genie, and Prodigy fell off the radar screen.
And H&R Block, seeing the writing on the wall, put CompuServe up for sale, and AOL took the bait (deal pending).
MSN? Either MSFT is completely asleep at the wheel (possibly), or is slowly, quietly unwinding their pre-Internet on-line service strategy (more likely).
And there you have it, if you want it, come and get it, but you better hurry cause it's goin' fast:
AOL is now the #1 on-line service (by default). The only problem is, they've won a game no one else thinks is worth (earnings$/share) playing. This is yesterday's news. The unlimited content of the Internet will ultimately vestigialize all fee-based on-line services, including AOL and MSN. These two may very well continue operating under those monikers, but not as the pay-as-you-go, glorified bulletin boards that they are.
The emerging, sustainable, Internet revenue model appears to be based mostly on selling ad space, a la Yahoo, or actually selling SOMETHING, a la Amazon (both of these are pretty price too, though not necessarily long-term short fodder). AOL, to its credit, sees this, but they are going to have to scramble pretty hard to pull in enough $ to offset the very probable collapse of their subscriber growth, yet still maintain their stock price. It's something of a shell game with them right now, and the current market updraft sure helps mask the underlying issues. In true confusopoly fashion (thanks Dilbert), it's hard to tell what business they're actually in.
I think this transition is why they're already proactively dumping their ISP function. The capital requirements are fairly hefty and never ending -- so much better for AOL to farm it out, for now, at near break-even to a subcontractor. In fact, I would not be surprised someday to hear an announcement from AOL (should they become at all successful at selling on-line advertising) that they are henceforth going to transfer all accounting and payments for on-line access fees directly to the subcontracting ISP. That way they can metamorphose into yet another business entirely: ad revenue from content aggregation, and completely divest the ISP/on-line service business. Maybe they already have.
In any event, the new race has started. I give the AOLians lots of credit for trying to come up with a viable business model in the quicksilver Internet arena. I just don't think the stock is worth anywhere near its current price, considering the risks and the fact that their (dubious) eyeball inventory is always going to be a (tiny) subset of the Internet's. WS obviously has a different opinion entirely.
Will Yahoo et al just roll over and go away? They're the de facto competition, for now anyway. Will the economy hold up long enough for AOL to establish themselves as a new advertising platform? I don't think ad companies do all that well during a recession... |
