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Technology Stocks : America On-Line: will it survive ...?
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To: Mark The Trader who wrote (69)9/19/1996 8:04:00 PM
From: Allen Plyler   of 13594
 
Mark,

I guess high P/E's don't completely scare me away. The key is increasing earnings which will lower the P/E. I just don't see the sources of revenue changing drastically in the AOL model. Basically, you have subscribers and advertisers. Subscribers have economic incentives to limit their costs since the Internet is basically used by consumers for entertainment more than for the use of a basic good or service. You can live in the modern day and age without the Internet, just like you can live without cable. But the battle with the consumer is earning their loyalty and charging them for their time. My guess is that for every new consumer you have the basic toy response. When you get a new toy you play with it a lot the first day, much less the next until you don't play with much at all after a while. AOL will most likely earn less per customer in time. If they earn less per customer, then that means they aren't spending as much time surfing which means that the customer won't be as exposed to as much advertising.

Do advertising on the net pay for itself? I don't know. But a lot of people are hoping the advertisers will become convinced it does or the advertising revenue just won't be there.

People want one stop shopping. If you get cable and internet in the same box, and that is provided by the cable company look out. Could a cable company sign a deal with AOL for access and make it work? Sure, but there may be cheaper ways to do that.

Why has Microsoft seemed to be backing away from this area? Is it because AOL is too tough of a competitor? Or do they just think there isn't a very good payoff?

Allen
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