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Technology Stocks : America On-Line: will it survive ...?
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To: jack rand who wrote (6586)12/28/1997 11:21:00 AM
From: Steve Robinett  Read Replies (2) of 13594
 
Jack et al: I see AOL is back to the expensive shotgun approach to advertising. The wrapper of today's L.A. Times is an AOL ad with a disk. The whole deal--plastic three-color printed newspaper bag, disk and logon instruction card--has to cost $.50 a piece, maybe more. With that kind of random distribution--not even a computer magazine but a newspaper--let's be generous and assume a 2% hit rate. 2% of the Times readers log on to try AOL. That 2% cost $25 a piece, plus whatever it costs to give them 50 hours free. Some of that 2% will drop out. By the time they add it all up, I'd guess they spend about $100/customer. The few who remain have to stay 6 months as paying customers before they are worth having. As time goes by and the wave of interest in online activity crests--there is already some evidence that the rate of internet growth is slowing--this sort of advertising becomes more and more expensive, eventually, pointless.
Best,
-Steve
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