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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 232.52

+0.1%

Dec 26 9:30 AM EST

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To: Eric Wells who wrote (75033)	8/21/1999 10:14:00 PM
From: Glenn D. Rudolph	Read Replies (1) of 164684

Glenn - what do you estimate is the average actual cost per user for internet service? I'd say it's very low - pennies. When a user pays AOL $21 a month, the user is helping to fund a lot of AOL-specific services, as well as help cover AOL marketing costs (it cost a lot of money to mail out millions of CDs every year). Eric, I can't give a number regarding the costs to provide ISP service but I know it is not that low. The service in question is dial-up so we have phone lines. Litterly millions of them which AOL sold to UUnet but leases back at a favorable rate. Included in that is the the Remote Access Concentrators, data backbone and various other costs. Most of AOL's profit comes from their advertisers and their share of e-commerce. The ISP service is not all that profitable and AOl has a lot of scale here. I can't discuss the Justice Department and claim I know what I am talking about. I don't there. I do know that selling a product or service below cost will not be tolerated and that would be far easier to prove than the current investigation. In either case, I doubt the subscriber will defect to MSN. MSN has never had the appeal of AOL. Newbies go where their friends suggest for service here and most of their friends are an AOL subscriber. I suspect most of the people on SI are not newbies. Broadband will be an important issue someday but it is not important to the newbie either. My sister is a perfect example of that. It is a long story but I find it interesting. AOL is really headed into higher margin areas such as the advertising and ecommerce. The subscription fees will not be their profit center in the coming years. This is a lot of hot wind by MSFT due to their prior failures in this space. I see no reason why they would succeed now when the failed miserably in the past. Did you know that AOL did $1.2 billion in e-commerce in Q4 of 98? That makes the Amazon revenue appear very small and look how the market values Amazon. My money is on AOL in this space and I plan on leaving it there. Glenn

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