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Technology Stocks : America On-Line (AOL)
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To: Pruguy who wrote (32113)10/2/1999 11:58:00 AM
From: Steve Robinett  Read Replies (1) of 41369
 
Pruguy,
You say, They (CompuServe) use the AOL infrastructure, so additional compuserve customers doesn't mean additional cost.

Pardon me? You're suggesting that AOL already has the network in place so adding hundreds of thousands of customers won't force them to expand that network. What, AOL has a lot of unused capacity sitting around? I don't think so.

I would suggest just the opposite. CompuServe had been losing customers until AOL took it over and CompuServe itself probably has a lot of unused network capacity. The $10.83/mo net CompuServe gets is by no means all profit, in fact, more like all costs and no profit. The deal just barely covers costs if at all (the last time I figured AOL's costs there were over $17/mo/subscriber). They are doing it for market share, establishing a slightly different brand for business users and hoping the customers stay longer than 36 months. A "business" brand attracts a different kind of advertiser than AOL attracts.

Best,
--Steve
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