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

To: gpowell who wrote (24885)	8/23/2000 6:40:43 PM
From: Michaelth1	Read Replies (1) \| Respond to of 29970

AOL and ATHM do not compete directly I disagree with that statement if you mean that competing "directly" requires selling virtually the same product (e.g., Coke and Pepsi compete directly; McDonalds and Burger King compete directly); competing directly also encompasses one company trying to retain its customers while the other tries to steal them away. I disagree with you that AOL and @Home are not close substitutes. One (@Home) is a complete substitute for the other's (AOL) service (see discussion below regarding content). Is one superior? Clearly. That just means that it's not an exact substitute. The fact of the matter is that for @Home to succeed, it needs to steal subs from AOL (and other narrowband ISPs, but it isn't worthwhile discussing them since AOL dwarfs them in size). I bet that few subs of @Home are new Internet subs, i.e., they are quitting their narrowband ISP (AOL or otherwise) and joining @Home. True, AOL is also a content provider and, for $9.95 (I think), you can get just AOL's content and not the AOL [crappy] connection. So it is possible to have both AOL and @Home. But does AOL want that? No, and it will do everything in its power to prevent that migration. First, AOL does not want to lose the $10.00 per sub. Also, AOL wants the control of putting its content in front of the sub first and putting its web site up first when the Internet is accessed. Additionally, most would agree that AOL's marginal content probably isn't enough to keep someone paying $9.95 per month, particularly after that person has experienced the broadband world. So that $9.95 will likely be lost eventually as well (particularly if instant messaging becomes universal). The tug of war between AOL trying to retain subs and @Home trying to steal them is called competition, even though the services are not identical. A very crude analogy is when Amazon.com initially was competing with traditional bookstores. The bookstores had all the customers but Amazon had easier access, more selection, etc., that provided the masses with a better choice. In order to succeed, however, Amazon had to migrate those customers by competing with bookstores. Obviously, it's far from a perfect analogy because, among other reasons, a book is fungible. I think that people are forgetting that simply because @Home has the superior technology that can easily replace an inferior technology (AOL and other narrowband ISPs) doesn't mean that it's "game over" for AOL and a victory for @Home. There exists the minor technicality of convincing people to quit AOL and to migrate to @Home.