Bob, thank you for the marketing observations...I am a finance guy, so can use plenty of help from an experienced marketer.
As for the AOL users at 14.4, buy USRX! x2 is coming and the cross promotions are going to be big. AOL is using USRX hubs for all capacity additions, I have read...
I acknowledge: my reason for owning AOL is based on the premise that advertising and e-commerce will allow the AOL experiment to pay off, * or else * AOL will wind up owned by somebody big that already owns a lot of copper wires....7.5+ million paying subscribers is too big a block to let scatter....My worst scenario is the one presented as the opening message on this topic by CA//....slow death by thousands of ISP's ripping little pieces from the behemoth.
You observed: << IMHO, AOL is in deep trouble in terms of sustained growth and even worse for profits. I've been involved with internet sites based on ad model, and it is a tough business at this point. If they can't show a profit on access, they won't make up for it with ads.>>
Have to quibble with your first comment - sustained growth...AOL is in trouble on answering their phones, and in adding modems fast enough, but there is no lack of growth. They were stalled last fall, pre flat rate. After flat rate announced, the new arrivals blew down their doors. Case announced they are over 7.5 Million users on 1/3/97, additions for 4th quarter are probably 800,000 +. With WOW! tossing in the towel, Prodigy stalled, and Compuserve, and Netcom both deciding business account access is a better business, we have a horse way out front and running away. MSN will be formidable, but I look for the two of them to scrap back and forth for a long time over their shares of a fast growing market.
Your second point is the kicker: Tough to make it on access alone, tough to make it on ads alone.
Anybody see a solution to the dilemma?
AOL is approaching breakeven on consumer access portion of their business. They load up their network with individuals evenings and weekends, and have plenty of unused capacity M-F up to prime time (7pm-12pm). They are working at selling this capacity as dial up "Private AOL's" to corporate users. (Early user example is Century 21 real estate franchise system...New AOL CEO Bob Pittman's prior employer).
Meanwhile, the ad business grows with joint deals like the Netscape quid pro quo, and the initiatives for local content and classified advertising that are joint ventures with the Tribune Company should feed some incremental income. Then throw in the online commerce and direct sales business. Plus they now have a co-branded credit card.
I agree with you that ads alone is not going to do it. But who has a better shot at making this combination of revenue streams work?
Question for you: what advice (besides add some modems) would you give to AOL or to an ISP? Do you buy the concept that the value of a net goes up based on the number of participants? Or do you go for short term profitability, and raise access prices? Think the AOL type user will go for $24.95 per month?
Incidentally, I saw a post here saying AOL added 1 million users in one month. I doubt that.
Thanks for your input,
Brian |
