Welcome to even newer heights. Great articles in today's WSJ, interactive.wsj.com. About yesterday's service blackout which highlighted the service's unreliability*, subscribers will get a 30 cent credit. WOW!!
*Remember, AOL was the service which was providing erroneous stock market quotes in July.
Discussing 50% churn rate-
"Word-of-mouth is huge -- it's everything -- and 50% churn creates so much negative word-of-mouth that it can make an otherwise successful marketing program
collapse," says Geoffrey Moore, president of Chasm Group, a high-tech marketing firm. "There are just too many people out there saying, 'I tried it and I didn't like it.' "
Discussing AOL's accounting-
"The massive marketing costs would more than wipe out AOL's reported earnings if the company simply subtracted each quarter's expenses before calculating profits. But it doesn't. Accounting rules let AOL spread out the bulk of expenses over 24 months, under the theory that new subscribers represent assets that will pay back what AOL has spent to "purchase" them over time."
"This has allowed AOL to show profits in recent quarters. In the fiscal third quarter ended March 31, America Online reported net income of $15 million on revenue of $312 million. But that net figure doesn't reflect how much AOL spent on marketing: Analyst Jonathan Cohen of Smith Barney Inc. says AOL spent 110 million in the quarter to acquire a net addition of 905,000 new members, at a cost of about $121 a head."
"Instead of taking that hit, AOL's line for "deferred subscriber acquisition costs" simply went up by about $90 million in the quarter. The deferred costs now total almost $280 million, more than enough to wipe out all AOL earnings for the past two years."
Clearly, WS will disregard AOL's "earnings" as the phantom they have been, i.e. total manipulation and not real.
BTW, I have read recent reports that the advertising model AOL hinges its future on will not develop. The internet will become a direct marketing venue. Advertising goes unread and largely unnoticed and new programs are available which allow browsers to evade it entirely.
Yes, AMER is widely overvalued, not so much as when I first posted when near 70, but then again the truth about the company is getting out.
Regards,
Duncan |
