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To: Glenn D. Rudolph who wrote (61646)	6/10/1999 10:18:00 PM
From: Winston Lee	Read Replies (1) \| Respond to of 164684

Glenn, AOL has scalability concerns primarily because of its closed platform system. The aol.com internet site is really a skeletal internet site dedicated primarily to draw additional potential customers as new AOL members; in other words, aol.com was never meant to be a portal. The closed platform system was a distinct advantage in the past because it was established and marketed before the internet got started. AOL started with a huge advantage by having numerous subscribers before the YHOOs of this world started to take off. By locking in early subscribers, AOL was able to constantly enhance its services (its buddy and instant messenger services were excellent features) and the subscriber base snowballed to the current 18 million+ members. When the critical mass hit, there was an explosion in the subscriber base. Equally important is the fact that AOL was able to maximize advertising and e-commerce revenues through flawless execution. As subscriber base increased, AOL experienced exploding revenues from the ISP, advertising and e-commerce revenues. I expect AOL to experience continued strong growth domestically, but due to onset of some level of saturation, less than the high double-digit growth from the past. I believe AOL has 15 million+ US subscribers and 3 million+ overseas subscribers. International is where future growth will be - and this is a battle that MSN and YHOO have won already. Saying we have 3 million+ subscribers overseas really demonstrates AOL's weaknesses: lack of brand recognition and eyeballs overseas. I have travelled all throughout Asia and nearly all use MSN, ATT or local ISP as ISP, and MSN and YHOO as the primary portal. In Japan, a nation of 120 million people, AOL, as of last year, only had a few hundred thousand subscibers. All my Japanese friends had never heard of AOL, but raved about MSN's and YHOO's portals, which were specially tailored for the Japanese audience (for example, a lot of local business and other news due to tieups with local Japanese financial and other institutions). The same went for China, where I had travelled extensively. Japan makes up 70% of Asia's entire GDP, and Japan and China probably make up nearly 90% of Asia's GDP. YHOO and MSN have already captured majority of the eyeballs and brand recognition worldwide among computer users. Both have extensively upgraded the services, which will drive advertising and e-commerce revenues for many years to come. China is experiencing consistent triple digit computer hardware, software and internet growth ... annually. AOL's sending of disks to lock-in subscribers succeeded in the US because it had a distinct advantage as the first mover. As AOL was locking in domestic subscribers, it failed to the same with overseas subscribers. As the internet exploded, the international viewers' first experience was with YHOO and MSFT, primarily because of their brand recognition, ease of use, and an open-platform system. I don't think AOL can succeed internationally by mailing out massive number of disks - those disks, in most cases, will go straight to the garbage can. I think AOL made a crucial mistake in not making aol.com a comprehensive portal. Within 3 years, YHOO's market cap. will be greater than that of AOL. Regards,