'"Our goal is to be the most valuable and respected company on earth," asserts Steve Case, founder and chief executive of America Online. "I don't believe there is any company better-positioned to continue to grow over the coming years."
That's no hyperbole. Last year, in the stock market at least, it was quite clearly the year of the Internet, with investors rushing to snap up stock in hundreds of small and medium-sized companies with diverse and different kinds of stakes in cyberspace and the ever more real electronic commerce revolution.
In the circumstances, it is entirely apt that AOL, a company many regard as the backbone of the Internet, has dreams about the future. Certainly, it was the top ranked performer in the new Barron's 500 for 1998, outscoring every other company thanks to a 13.8% return on investment and a stock that returned a staggering 586%.
But as Case would argue it, there is a lot more to AOL than just the Internet. To be sure, the company's 16 million-odd subscribers can plug into the 'Net through AOL, but they also get a lot more, from chat rooms, electronic magazines and newspapers to special e-commerce sites and a lot of unique content, notably its personal-finance information. The cost is typically $21.95 a month, just a couple of bucks more than the cost of a plain-vanilla Internet service provider. But that doesn't seem to put off users or slow the increase in new members, many of whom are going online for the first time and so need and like AOL's extra degree of hand-holding.
Over the 42 days of the traditionally peak Christmas period, AOL added a million extra subscribers, and Street analysts look for another million to come on board by the end of this year. With the 'Net steadily becoming ever more ubiquitous although some 70% of American households are still not connected, there is no immediate concern that growth in AOL subscribers -- and AOL subscriber fees -- will tail off. Nonetheless, the company is pushing hard to diversify its revenue stream, building up income from both online advertising and e-commerce fees and commissions to the point that they contribute about 20% of sales.
In fact, the future of AOL may become ever more geared to the growing e-commerce boom. Right now, the mass concentration of 16 million subscribers, many of whom log-on on a regular basis, presents any company wanting to sell over the Web with the only market that has yet approached critical mass, something that allows AOL to both charge handsomely for advertising and to take a variable commission on sales.
"Each deal is different," says Case. "Some are exclusive and some are not exclusive. Some get prominent visibility on the service, others get modest visibility. We'll sometimes guarantee a minimum traffic but we don't guarantee sales. The best evidence it is working is the expanding relationships we have with most corporate customers. Most are happy paying more going forward than they paid in the past." Among the companies with such AOL marketing agreements are Amazon.com and 1-800-FLOWERS.
AOL stock continues to rise, climbing to a new high over 120 last week, more than a 50% rise already this year. With its deal to buy Netscape for $10.2 billion now complete, AOL's Internet position is further strengthened. The market clearly buys Case's bullish arguments.'
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