Hi Brian,
I said: On one hand, they trot out their in-house member numbers to differentiate themselves whenever they want to justify their stock price and ad rates. On the other hand, they lately seem to be having to reach beyond their captive members, to the Internet as a whole, for their continuing growth. They can't have it both ways.
You said: It is my position that they can have it both ways, they already have it both ways, and they will continue to have it both ways.
Ah, we have a market!
Well, AOL would like to have it both ways, I'm sure. Every step AOL takes toward the Internet is a step away from their captive user base and step towards an open, non-proprietary, highly competitive environment, an environment in which they will find it even more difficult generate real earnings. Unfortunately, AOL is not moving towards fuller Internet participation because they want to -- they have to! The Internet is the real competitive arena and AOL knows it, not their closed, tightly controlled, pale imitation of the richer, larger, real McCoy.
Most of AOL's content and advertising is not accessible to non-members. Their subscriber growth is inherently limited, as is their advertising appeal, revenue growth, and earnings growth. AOL, recognizing this, is beginning to move in the direction in which they are being pulled.
I'm not saying AOL has no place on the Internet and can't be successful. I just don't think the current stock price has any justification in light of these trends. Any future, lasting success they achieve will be directly proportional to the extent they are able to act less as a middleman and more as a result of providing actual, useful end-user services, products, and content at rock-bottom prices and top flight quality -- because that's just what their Internet competitors will be doing. Of course, the Internet is already growing to contain legions of original, highly focused competitors in just these areas, and new ones will appear frequently, as the price of entry in some areas is practically nil. The Internet is a monopolist's worst nightmare!
To the extent that AOL maintains its "closed system" model, the Internet will just continue, over time, to marginalize them. AOL really can't have it both ways. Either they ultimately become an open, fully integrated member of the Internet community, competing on its terms, or they don't.
Hope my arguments haven't left you all higgledy-piggledy. :-D |
