IS AOL INSULTING OUR INTELLIGENCE?
Read and weep --
By Peter D. Henig
Red Herring Online
September 17, 1998
Bob Pittman, America Online's (AOL) chief operating officer, is a great salesman.
Not only does his voice rise an octave or two as he draws his audience in -- in this case a roomful of Gucci-appointed investment pros at the NationsBanc Montgomery Securities annual investment conference -- but like any good preacher, he actually gets louder the longer he speaks.
Suffice it to say, then, that Mr. Pittman was nearly screaming the gospel of AOL by the time he finished presenting at the Ritz Carlton in San Francisco.
But for all of his bluster, Mr. Pittman's remarks boiled down to just two points: that consumers today are brand buyers, so brands now beat a relationship; and for Internet customer, convenience is king.
Well, which is it?
The problem with Mr. Pittman's speech, however, was that, like any good salesman, he laid on the schmaltz a little thick.
It's no secret that the average person, or the average American family, cares less about the technology behind the Internet than they do about what they can do on the Internet. For the average user, chat is at least 10 times more interesting than Inktomi's caching products.
"People want things that save them time, that's why people like this product," said Mr. Pittman. "Think VCR and microwave oven."
But it was his "a brand beats a relationship," argument that really challenges the notion of just how stupid the American online public can be and still let AOL get away with its ever-changing business strategies.
Listen to this: "We raised our prices and our customers stayed with us." said Mr. Pittman. "Our services went down and our customers still stayed with us."
And despite his comments to the contrary, Mr. Pittman then concluded, "we have a relationship with our customers."
Now wait just one darn minute. We thought the American people didn't want a relationship with their Internet companies. Mr. Pittman said so himself, right along with "convenience is king."
Which is it, Mr. Pittman? For consumers today, does a brand beats a relationship or does AOL have such great relations with its customers that they're willing to pay higher prices for worse service just to hang with AOL?
Confusing question, and an equally confusing message from Mr. Pittman.
But AOL seems unconcerned with underestimating the expectations of the American online consumer. In fact, given the statistics Mr. Pittman was throwing around, AOL's stock should be on the moon by now, the market selloff notwithstanding.
Here are just some of the metrics AOL is preaching: 15 million of the 23 million homes connected to the Internet use America Online and the size of the U.S. market alone will ultimately rise to 75 million homes; AOL has a reach greater than MTV or USA Today, yet less than People magazine; it has 9 million registered stock portfolios, has generated 1.5 million new lines for long-distance company Tel-Save in 8 months, and tripled Century 21's number of home closings; AOL.com's online presence operates at about 10 percent the cost of the standard online portal; AOL Europe broke even with 1 million homes subscribed, and its chat service, ICQ, signs up 1 million new registered users every 3 weeks.
Speed as an upgrade
And it's not taking its broadband future lightly either.
Once again, because the consumer has a relationship only to the brand and not the service -- or was that the other way around? -- AOL will be offering it as a feature of its existing service, for an additional fee, "just like any of our other services," said Mr. Pittman. "Broadband will complement, not replace, narrowband."
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