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Technology Stocks : EARTHLINK (ELNK) -- Ignore unavailable to you. Want to Upgrade?

To: Alan Edgett who wrote (500)	8/2/1998 11:49:00 PM
From: Oeconomicus	Respond to of 2553

OT (sort of): Edge, it's not that simple. If they can get five times the number of subscribers by making it free, they will have something approaching (but less than, considering economies of scale) five times the cost. Even if the cost of servicing those 50,000 hypothetical subs is only half the going sale price of $20 (which it's not, obviously), that $10/mo cost adds up to $6 million p.a. They will also have the costs of selling ads, of course, in addition to the ISP's operating costs, so the revenues would need to be even higher. From an advertiser's perspective, merchants would have to be convinced that these subscribers will spend significant online time "eyeballing" their ads and figure out the cost, per impression, of this advertising versus traditional media (or other ISPs and Web sites). Will they be able to get enough advertising to support the operations? I don't know, but I doubt it. BTW, a radio station's cost structure, IMO, is nothing like an ISP. A radio station does not have to constantly invest in additional equipment, lease additional phone lines and hire more support staff just because a few more people decided to listen. It's costs are relatively fixed. Bob PS: I still say they can't build a "virtual community" based on advertising and no content. They may be able to sign people up, but advertisers would quickly figure out that the users are not hanging around their portal/home page enough (and without content, they won't) for the advertising to be seen, much less effective. The Achilles' heel of the "advertising model" of internet services, IMO, is the ease of tracking the results or effectiveness of such advertising.