To: Autumn Henry who wrote (5598 ) 11/6/1997 10:46:00 PM From: Brent D. Beal Read Replies (2) | Respond to
Here is why AOL is going into the crapper. This is almost a purely theoretical explanation, but one which I believe is valid. AOL, by moving toward an emphasis on ad revenues, is placing itself in the position of a third party that makes money by taking a small part of the money that is passed between others engaging in some kind of exchange. This works fine when there are information costs or other impediments to the other parties getting together by themselves, but the internet, in my opinion, is the obsolute worst place to attempt to employ this type of strategy. AOL keeps talking about real estate, but every ad the put on their service dilutes the effect of the ads already there--how many prime spots can they sell? Like it or not, there is a limit and unfortunately--this get back to my other point--it is very easy to track the effectiveness of electronic ads. I sold advertising for a few years, and I know from experience that the ambiguity associated with advertising worked in my favor on many occasions, but what does the AOL ad salesman say when the company produces a count of the their click-throughs--hard numbers, in other words. It become very clear what is working and is not working. This goes back to my point about information--it's too readily available and AOL's role as the middle man is too easy to circumvent--it just won't work, at least not the ad side of it. The Gap just went online for example--they didn't need AOL. How many major corporations have web sites and are currently conducting business without AOL. The fact is that AOL may survive as an ISP, but not as a cable station--in other words, the internet is not TV and following the same model isn't going to cut it. I expect to see AOL is the 30s before long.
