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SMARK COOKIES: Just keep me connected - The giant of B2C internet business has finessed its merger with Time-Warner. But can AOL evolve as effectively in the future as it has in the past?

SMARK COOKIES: Just keep me connected - The giant of B2C internet business has finessed its merger with Time-Warner. But can AOL evolve as effectively in the future as it has in the past? - Why focus on a single company this month rather than on a theme?

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Why focus on a single company this month rather than on a theme?

Because AOL is such a gorilla in the business-to-consumer (B2C) internet space. As AOL-Time Warner, its market cap is more than dollars 200 billion - not far off Microsoft, and probably as great as all other B2C businesses in the world combined. The AOL subscriber base of 30 million consumers dwarfs any other ISP or paid-subscription portal.

AOL has been key to the evolution of mass consumer internet usage and of profitable internet business models, and it will continue to be.

What was AOL's role in the early days of the internet?

AOL has been around for 15 years, but it took off in 1997-98, as the internet broke through into the mass consumer market. It took on the role of gateway to the internet for the general consumer. Steve Case always described AOL as a consumer marketing company rather than a technology business. For Geoffrey Moore, AOL was key to the internet 'crossing the chasm' from a niche to a mass market.

Three or four years ago, consumers needed basic help on all four Cs of the web: Connectivity, Communication, Content and Commerce. AOL's brilliance was to provide a bundled, easy-to-get-started solution to all four: an ISP plus e-mail plus portal, with a help desk that actually answered the phone, and an idiot-proof CD installation mailed out monthly to every household in the Western world. Early-adopter geeks scoffed at AOL's inelegant technology and sneered at the high ISP prices, but the general consumer didn't care - AOL got them wired.

How has AOL's role evolved?

It has dramatically expanded its offer, and its value for consumers in Communication and Connectivity. Buddy Chat (instant messaging) is live e-mail - plus you know when buddies are online, you can create chat-room 'conference calls', it's more functional than mobile phone SMS, and it's cheaper than long-distance phone calls. AOL Anywhere lets you access your e-mail from any online connection, without an AOL installation. In October AOL launched AOL-by-Phone in the US, which for dollars 5 extra per month lets you interact with the web via voice. AOL local access numbers cover 99% of locations in the world where you might go on holiday or work away from your office. There's also AOL TV, and a Blackberry-type AOL device for wireless e-mail text access. The strategy to deliver ubiquitous connectivity and communication is powerful.

AOL is also developing its role as a portal, offering Content and Commerce, but here the value for the consumer is debatable. Consumers aren't baffled by search engines any more - we all use Google. If we want financial news and services, maps, weather info, shopping carts or auctions, we go straight to Schwab, Bloomberg, MapQuest, Amazon or eBay - one click away on Favourites, and with download efficiency and site design far better than AOL. Content- and Commerce-wise, AOL is Crap.

Doesn't that raise a big question over AOL's future since its merger with the world's largest content provider, Time-Warner?

Absolutely. With Time-Warner it gets the world's leading portfolio of films, TV, music, magazines and books. It also gets 13 million cable TV subscribers in the US. The rationale is cross-selling. The new company's CFO Mike Kelly says: 'The customer base is our biggest asset. It's about finding new ways to offer them products and services.'

Have we heard that before? Yet how many mega-mergers based on cross-selling have worked? (Try financial services and travel, for starters.)

This is not to say that the individual businesses of AOL and Time-Warner don't have great prospects. But the synergy logic looks thin, and trying to extract those synergies will sap energy and investment.

Moreover, it will distract AOL from building on its core successful value proposition: opening up Connectivity and Communication for the mass market.

There are enough opportunities and challenges there for the next decade: multiple portable wireless devices, voice interaction, online audio and video delivery, new home entertainment systems, voice-over-internet, hosted/ASP services for consumers and small businesses ... the list goes on.

Bottom line?

As your average general consumer, I don't want Bugs Bunny or CNN animations downloading for five minutes every time I close AOL. I want to get wired, I want Connectivity and Communication. That's what AOL did for me over the past five years, and that's what I'll pay them for in the future

This article was first published on managementtoday.co.uk

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