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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (9540)	4/16/1998 12:42:00 PM
From: rhet0ric	Respond to of 13594

As rhet0ric stated, a membership increase with lower marketing expenses and a price hike. Not a mass exodus like some were predicting. Well, Sam, I'm not exactly turning into a bull <g>. I'm just saying that one of the big possible bearish indicators hasn't come through--yet. It seems to me that AOL changed its strategy recently. Before they were gunning all-out for growth, spamming everyone with free disks and low or standard rates. Recently they changed that strategy, and seem to be aiming for more stable membership, with greater revenue per member. In each case, I think their strategy was/is the right one. They needed subs and market share to become a player, while revenues were secondary. Now they're a player, and have to start focusing on revenues. The fact that subs are growing despite everything indicates that AOL has a lot of momentum, which could take awhile to slow down or reverse. Next quarter's sub numbers and revenue will be very interesting. I'm still very bearish long-term, as I think it will be difficult for AOL to stabilize subs and grow revenues while scaling its network to keep up with the Internet, all the while fighting off more and savvier competitors. I'll short eventually, when I see things going downhill for AOL. But to short now would require a belief in a general market or Internet stock meltdown, and I would have a lot of trouble timing that. While an ad for a Ford explorer might not be of any use to your niece, her parents might enjoy it. Under most ad models, Ford pays for the view of the ad whether anyone clicks on it or not. A good click through rate is about 2%. There's definitely money to be made in ads. The issue is that AOL is spamming its users in a way that regular ISPs don't, while at the same time charging a higher subscription. As long as their subs hang in there, they'll bag money from them. But if/when subs drop, they'll need to reexamine that. rhet0ric

To: Sam who wrote (9540)	4/16/1998 5:21:00 PM
From: Mike C	Respond to of 13594

Excellent post Sam - just the numbers I was looking for. This additional information throws a little water on my analysis of member increases or lack thereof. As you may suspect my model of a decrease in stock price is based upon market realization that membership numbers can not increase forever and may even begin to decrease as users see other avenues to access the web. The table you provided indicates substantial variation in the number of days to reach the next million members.I may be reading a bounce as a trend. For those who are interested: Last 3 reporting periods - Days to 1 million increase: 75, 64, 86. Time to 1st million - 736 days Average time between million members - 83 days Increase is fairly linear save for early 1997 when connection problems occured and peaks near Christmas. Average days to 1 million increase along the best straight line through the data - 122 days. By the way, there is reasonable correlation between rate of stock increase and rate of member increase. If it takes more than 90 days to reach the next million she could be in trouble, less than 60 days stock could continue trend IMO. Mike C

To: Sam who wrote (9540)	4/16/1998 10:13:00 PM
From: Art Stone	Read Replies (1) \| Respond to of 13594

A very interesting analysis. There is a very clear, almost linear relationship - about $4 of share value for each million subscribers... Up until the current number. With 12 million, extrapolating the ratio would point to a value around $48/share, yet it is selling for $75... What has changed?