>If advertisers correctly understand these trends, AOL will soon be bankrupt.
Whoa! If that's what advertisers think, aren't you curious as to why would they go ahead and sign multiyear deals with AOL.
I think you have adopted a very idiosyncratic reading of these events and how they relate to the way consumers will choose to access online services.
Just step back to a general consumer marketing perspective for a moment. Don't you think that what the mass market generally gravitates toward is simplicity. AOL's promise to deliver proprietary content and the Internet all through one service, for one flat monthly fee, for unlimited use is precisely what the mainstream consumer will choose, rather than the hybrid you propose.
Whether AOL can successfully deliver that in a satisfactory enough way to prevent customer erosion to ISP-only service seems to me to be the crux of whether AOL is going to grow and profit from here.
I'm also struggling to find some historical precedent that would support your line of reasoning. It seems to me that one of the most difficult tasks in business is to change consumer behavior. Banks had to wait more than 10 years for a majority of customers to stop standing in teller lines and use the more economical ATMs. Product strategies that depend on people throwing out their old reliable whatever and adopting new technology often crash and burn. At best, they better have enough cash to survive while adoption proceeds at a glacial pace. You know the joke about why it took God seven days to create the world. Because he didn't have an installed base.
But here you are proposing a spontaneous, mass change in consumer behavior. Me personally, I don't know a lot of people like that. I suspect that if we detect any trend at all toward the kind of usage you are expecting, it will happen over the course of years. That would give AOL plenty of time to grow the customer base by enough millions to more than compensate. And, hey, if they can't grow the customer base by millions, then they're in big, big trouble no matter what the average monthly revenue per subscriber figure.
Your analysis also seems to me to echo the mistaken projections of catastrophe that accompanied AOL's shift to flat rates and the end of those $300-a-month-bills to hardcore users.
Management's job is to be able to respond to the changing competitive landscape. For all their faults, AOL management has shown some adaptability and survivability. Show me the management of another online service, ISP or other potential competitor that you think is doing a better job of wending its way through this minefield and creating the critical mass market share (installed base, installed base, installed base) it will take to be a survivor. |
