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Technology Stocks : AUTOHOME, Inc -- Ignore unavailable to you. Want to Upgrade?

To: Tom Tallant who wrote (16826)	11/7/1999 12:30:00 PM
From: Bob Zacks	Respond to of 29970

A must read concise and simple answer to open access. messages.yahoo.com

To: Tom Tallant who wrote (16826)	11/7/1999 12:30:00 PM
From: Rascal	Read Replies (2) \| Respond to of 29970

I am still noodeling around trying to understand the benefits to TJ and Case in a deal.. I am trying to carry the business model in my head the way they do. ______________________________________________________ AOl is hitting all growth and profit targets now with clunky old dial-up and the street seems to be pleased. AOL makes money on each customer 3 ways: Subscriptions,advertising and e-commerce. Annually.. AOL makes $20.00 per subscriber. 20 million subscribers X $20.00 each = $400 million a year. Last quarter AOL made $350 million in advertising/ecommerce on 20 million customers who were on AOL about an hour a day. Annually..$350million X 4 quarters = $1.4 billion a year divided by 20 million subscribers = $70.00 a year per subscriber. So AOL subscribers throw off revenue of $90.00 a year each by staying on AOL about an hour a day. ______________________________________________________ATHM makes its money from their share of the subscription fees. ATHM management needs to diversify its earnings stream to get more from advertisng and e-commerce. (We know subscription revenue will continually be eroded over the years.) But it takes a long time for advertisng and e-commerce revenue to kick in even with EXCITE as a property. (Time and Talent needed here). So 1million ATHM subscribers X $20. each = $20,000,000. and this assumes ATHM keeps the whole $20.00 ______________________________________________________ The only reason I can see a deal makes sense to both AOL and ATHM is to immediately leverage the "portion" of the 20 million households that are: cable ready (as explained) but not "installed" AND currently on the net using dial-up. ASSUME THIS IS an OPPORTUNITY 2 MILLION Assume all these 2 million customers are currently AOL customers. Therefore, AOL is currently getting $40million from the subscription piece and $140million from the advertising/ecommerce piece with customers staying on line about an hour a day. If Aol quickly migrates these 2million customers to ATHMcable then ATHM will share in the Subscription fee. 2,000,000 X $20.00 (approx) equals $40,000.00 of which ATHM will get 1/3 or $13,200,000. This is incremental revenue to ATHM. _____________________________________________________- Why would AOL do this when the can keep the entire $90.00 per customer? Why share with ATHM? Because a broadband customer is worth more. Let's say an AOL/ATHM broadband customer continues to stay on line an hour a day. He will be receiving/viewing 10 times faster which translates into more advertising/ecommerce revenue. (This is why a broadband customer is valued higher than dial-up customer.) ______________________________________________________ So making a deal comes down to the split on advertising/ecommerce. How much more will AOL make on advertising/ecommerce on broadband? Double, $140. a year per customer? or even more? What portion will they give to ATHM? ______________________________________________________ Two years from now maybe ATHM and T will be in a position to run big numbers like AOL. But cranking up the advertising/ecommerce engine and cutting all the deals Excite needs to be competitive with AOL's content is not so easy. ______________________________________________________ Therefore, I see now why an ATHM/AOL deal makes sense. They just need to sharpen their pencils and come up with a fair deal for both. Somebody check my ZER0's! PS AOL is really good at their marketing which empowers the customer. They have pop-ups saying things like: "do you want to go faster" and then they lead you to a site where they tell you what is available in your area and what to do. This tutorial type marketing solves the communication problems that will exist for ATHM. Once customers are on the net they hate to change things because they fear repurcussions.