Hi Mike,
Thanks for your comments. AOL in and of itself doesn't fit the true definition of a gorilla when talking about the ISP space, but in their instant messaging niche, they certainly seem like one for the following reasons: (1) drawing upon the inferences made in the WSJ article, they own a huge proportion of the market there. (2) they own the proprietary architecture that runs the program, and therefore the millions of eyeballs that go with it, plus, according again to the WSJ article, it (IM) may just happen to be the ultimate in all killer apps. That's a nice situation to be in.
I will concede though that switching costs are relatively low, from a price and time standpoint (e.g. cheaper ISP are out there). In its favor though is the "if it ain't broke, don't fix it" mentality--the same mentality that has given many a market leader the sustained ability to attract its loyal following into the higher ends of the "margin ladder."
They also have to their advantage a sort-of network effect: everyone I keep in touch with through e-mail is already hooked up via my IM system. As a consumer, I will admit that I don't want to wait 20 minutes to download someone else's software when mine already works just fine. I also admit that it may be cheaper to move to some other ISP, but in turn I give up the good (and free!) content on AOL, plus I have to go through the hassle of establishing a new e-mail identity and contacting all my friends to inform them of it, etc. You get the picture. I could do it, but in this time-strapped world, I just don't find the benefits outweighing the implied costs. And that is what rounds out my argument for switching costs, from a time-strapped consumer's standpoint.
Rainier |
