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Technology Stocks : America On-Line: will it survive ...?
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To: PAL who wrote (6296)12/10/1997 12:53:00 AM
From: John Albert Moro  Read Replies (3) of 13594
 
It is too easy to totally discount AOL as a poor investment choice. I've noticed that many of the postings are quite negative towards AOL so I've tried to summarize briefly the positives and negatives, fwiw.

Positives:
1. Large and increasing subsriber base.
2. AOL as the premier player in its role as an ISP.
3. Increasing ad revenues.
4. Increasing revenues as subsriber base grows.
5. The opportunity for further growth as network computers
gain acceptance in the marketplace.
6. Internet sector as momentum leader in the market.

Now for the negatives:
1. Problems with AOL in providing good service to its customers given
its huge subsriber base, eg. server and E-Mail problems during
peak usage.
2. Slowing growth growth in membership as people choose among the
vast array of ISP's.
3. Given current fundamentals AOL is trading at a huge premium.
4. The limited revenue growth of AOL given that increased sales must
come from a growing subsriber base rather than from existing
clientele (that is discounting ad revenue which to this point is
rather unknown).
5. A large part of AOL's success depends on significant amounts of money on spent on promotion.

From Investor-Ex's link it would appear that AOL is well aware that a huge subscriber base is not the formula for success due in large part that this would involve substantial investment in networking infrastructure. This cost IMO would far outweigh any revenue gains from subsriber growth, hence the focus to increasing ad revenues. Indeed many of its recent news releases point out the growing importance of ad revenues as a significant revenue contributor.

JAM
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