These are alarming developments if you're AOL. I can't find one argument from AOL that gives it an advantage over MSFT. Mr Bill & Co have the bucks and all the time in the world to play the attrition game with AOL.
"Microsoft has been very successful in being a big infrastructure player -- that's their strength," said Bob Pittman, AOL's president and chief operating officer. "Consumers are our strength."
Really? Who does AOL think is using Windows and Office. If MSFT doesn't have the consumer's attention and mindshare, I don't know who does.
"It's about loyalty," said Lisa Buyer, an analyst with Credit Suisse First Boston.
Can't argue with that. Question is, whom the consumer will choose. If someone has spent months or years learning/using Windows/Office, they're not likely to switch to something else overnight (Outlook and I are practically joined at the hip). On the other hand, if MSFT starts to offer really cheap or free ISP services, who knows how many AOL-ers will switch at the drop of a hat. Don't forget, MSN also has content and it will only keep getting better (no one expects MSFT to get it right the first time).
But AOL executives insist even Microsoft won't be able to lose money on Internet access forever. "There are economics in the access business and everyone's got to play by economics," said Barry Schuler, president of AOL's interactive-services group.
Probably not forever. But it's because MSFT won't have to. AOL might be long dead (or swallowed up) before the "economics" even appear on MSFT's balance sheet.
"People don't buy on price," Mr. Pittman says. "They buy on value."
Value is a perception game that MSFT is a master at playing. Remember Windows 1.0 & 2.0? Absolute rubbish. (And -- speaking as a Macintosh user -- Windows 3.0 was way below par.) Yet people bought. And they bought, and they bought . . .
What does AOL have in the way of "value" that cannot be replicated and exceeded by MSFT? ISP service? Nothing exceptional there. Content? I'll wager that even as I type, MSFT is swiftly and quietly positioning itself to become the king of content.
Oh, and finally, a recent comment by Steve Case, AOL's chief executive: "Windows is the past. In the future, AOL is the next Microsoft."
I wonder if he really believes that. In theory that may be possible. But is it probable? I wouldn't bet on it. This man is whistling in the dark.
Anyone has arguments in favour of AOL? I'd like to hear them. |
