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Technology Stocks : America On-Line: will it survive ...?
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To: Harry Larson who wrote (914)12/31/1996 12:11:00 PM
From: John Howell   of 13594
 
Harry,

I appreciate your insight into the issues that pertain to AOL's profitability. I went short at 29 and have ridden the rollercoaster of publicity immediately after the hiring of Pittman to promote "brand awareness". I am still confident that I have made the right decision in shorting AOL for several reasons that don't relate directly to their shaky financial situation.

1.) AOL views the web as an entertainment medium.

It's just my opinion but I feel that the biggest commercial opportunity for content providers on the web lies in the brokering of valuable information and value added services to the general public and to specific niche markets.

2.) AOL is betting on their success in being able to turn proprietary content into commercially viable entertainment.

Sorry, but I have a life and I can't imagine too many people looking for kicks staring at a computer screen that links them to "entertaining" web-sites at slow speeds. When I do want entertaining content, I'll surf for it myself; thank you very much.

3.) AOL will become profitable by selling ad revenue to users visiting their "amusement park".

Advertising surveys suggest that spending on on-line advertising is still in the experimental stage for most people currently advertising on the web. Considering the slowness with which multi-media advertising occurs over the web, it seems dubious to me that a company would divert a large percentage of their advertising revenue from television, a vastly superior advertising medium, to a semi-static medium like the web.

4.) AOL views the provision of internet access as an entre to advertising revenue and is content to "break even"(?) on this part of their opertaion.

AOL's real problem is that it has already lost the battles necessary to win the war. If AOL can't make money providing access then they are nothing more than electronic billboard salesmen. In the near future, the public will demand the type of services that require immense bandwidth. The only entities that will be able to offer a commercially viable service will be cable and phone companies. Both of these mediums already own infrastructure and have the deep pockets to bury AOL.

I would appreciate hearing anyone's comments, either pro or con.

Thanks,

John
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