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Strategies & Market Trends : Value Investing
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To: Wallace Rivers who wrote (3225)2/14/1998 4:10:00 PM
From: James Clarke  Read Replies (2) of 78607
 
Could not disagree more with you on AOL, though I would not pay the current price. No barriers to entry? Let me name two.
1. Content. Many AOL users value the proprietary content. An entrant with 1% of AOL's user base can't provide that kind of content because they can't afford to. AOL's product is not simply internet access.
2. Switching costs. This is my favorite, because everybody thinks there aren't any. I can switch providers tomorrow, right? But what about that e-mail address I have given to so many friends over the years? It is of great value to me to keep that address the same.
Sure, there are ways AOL could blow it anyway. They nearly lost me a year ago when you couldn't dial in except at 3:00 in the morning. But they did solve that problem. A $2 price increase for a product I am satisfied with is not going to matter to me. I already think I get much greater value from the service than it costs me.

If you want to talk stock price, there's a different story, but I don't think its as crazy as it looks. I was very close to buying this stock a year ago, and missed it. Believe me, it looked just as crazy at 40 before doing some real thinking. Like an idiot, though, I held out for 30 and missed a triple.
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