If what I see on this thread is a microcosm of AOL investors, that is a frightening picture.
For better or worse, this thread is far from a microcosm of AOL investors. AOL is 2/3 owned by institutions, and that ratio is growing. The typical individual investing through institutions, particulary index investors, is someone building a retirement nest egg through a 401k. Besides institutions, some of the biggest holders are employees who own stock options. And they are more or less captured investors, since they can only see at certain times. So I would not worry about anything said on this thread, which is much more mature and enjoyable than many of the SI threads I have been on.
Yes, I believe that AOL is an excellent company, but my biggest cause of concern is the fact that so few people on this thread are able (or interested enough) to articulate what will make AOL grow and continue to grow for the foreseeable future.
FWIW, let me give that a shot.
1. AOL is the most popular choice among new internet users. It will continue to be that until something better comes along. It has a reputation for simplicity, for friendliness, and for a large audience base. There are currently around 15M subscribers, which represents about half of all ISP subscribers. If they keep that market share, and assuming that internet users will continue to grow at 100% per year, that makes for another 10-15M per year for at least another 2-3 years, which would make the total ISP population around 120-150M, and AOL's 60-90M. That means at least 60M x $22 = $660M in monthly revenues in two years.
2. Brand loyalty. Few AOL members leave, because they establish an email address, an online presence, and are comfortable with knowing how to get around. Sort of like SI users, as much as I would like to leave, I keep coming back :-)
3. AOL is expanding internationally, so after the US population subscriber growth flattens out, the international population should be picking up. Of course, the competitive environment there is much different, and it remains to be seen whether AOL can truly penetrate there, but again until someone better comes along, my bet is on AOL.
4. E-commerce is growing at a very rapid rate, and AOL is becoming the mall of e-commerce. Even companies like Amazon have partnerships with AOL, because you can not be an e-commerce company and ignore 15M AOL eyeballs, 10M Netscape eyeballs, 25M ICQ eyeballs, and 2 or 3 Comupserve eyeballs (the rest are too nerdy to pay attention, just kidding). And AOL is being paid high rent by these companies to reside on AOL.
5. R&D is fairly vigorous, and the Sun partnership has much potential with regard to a Java-based AOL client, which should keep AOL at the forefront.
6. Broadband will be coming. This is their biggest weakness right now, which is why I think ATHM is their biggest competitor. But the rumours are that a cable deal might be announced within a couple of months. DSL deals are already made, and only await popular acceptance of DSL and the telcos getting off their butt. That will open the door, if they choose, for VoIP, video conferencing, AOL-TV, and other convergence technologies.
This is not an exhaustive list, nor is it the best list, but it is why I think AOL is the place to be right now. Will this be the case 3 months, 6 months, or a year from now? I think so, but we have to re-evaluate not only AOL, but also the competition.
Good luck with your investments.
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