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Post of the Day
November 1, 1999

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America Online

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Subject:  The AOL Picture ...?
Author:  GeraldGarcia

Dear Fools,

I've followed (and owned) AOL for a couple of years now, having become a user and an owner back in the 3.0 days. I've read a lot of the AOL-published hype on 5.0, downloaded it and now use it, and wanted to put some questions out there to you, especially on how you think the 'new' software may impact upon AOL's price. Up-front, let me say I want to be more enthusiastic about 5.0 but have some reservations, which is why I wanted to ask what you think.

On this board, several among the most active (and respected) Fools have written enthusiastically in support of 5.0, stating excitedly all that You've Got Pictures and other new features would do for AOL member retention, expansion and increased usage. Among those of you who use 5.0 (Beta or full-version), do you agree?

"[AOL] 5.0, to me, doesn't seem to be all that revolutionary or new and I don't see the leaps in value-added services that I'd hoped to find."

As I said, I got 5.0. And, well, I'm under whelmed. 5.0, to me, doesn't seem to be all that revolutionary or new and I don't see the leaps in value-added services that I'd hoped to find. It's a little prettier -- the side tabs are a nice touch. You've Got Pictures seems to me a way to unabashedly generate $ for AOL and Kodak more than something that adds value to peoples' lives -- and essentially requires a scanner or specific film developing shops. I have a scanner but I don't think most do. And I'm not sure how anxious I am to have AOL dictate where I develop film so I can use their YGP service... And, while AOL is no stranger to advertising its premium services, I'm made somewhat uncomfortable that this new, 'central' premium service is so centrally featured: AOL has tended to be more ... shall we say ... subtle? (okay, they're not subtle, but this is rather 'in-your-face' on a different level, wouldn't you say?)

Expanding the AOL resident browser to extend to all the web will keep users within the AOL frame more effectively -- and promote use of proprietary and fee services, boost ad value and perhaps ad revenue -- but, again, this innovation hardly is 'revolutionary'. For however expansive AOL's internal pages are, it can't possibly keep up with the vastness of the WWW; expanding its browser in a way to incorporate that vastness back into the AOL frame makes perfect sense, will encourage users to stay on-longer, etc. But is it revolutionary?

I wonder about AOL's PDA strategy. To the best that I can tell, while the scheduler is accessed (and is 'most accessed' on AOL right now by users), it has no port to PalmPilots or other PDAs. Am I wrong? I just wonder, if the scheduler isn't an organizer book and it isn't a PDA, is it as useful as it should be to be touted as so exceptional a new feature and something users will never live without again?

I also am concerned that discussion of an AOL broad-band strategy has fallen to the way-side of late. While most of us are a way from getting away from simple phone access -- which I believe AOL recognizes -- we may not be as far away as we think. 5.0 has resident broadband support capability, but this potential isn't as useful as an actual broadband service option (besides BYOBroadband)... In other words, 5.0 is ready for broadband, but AOL doesn't seem to be. That leaves us ... without broadband.

And then there's the stock split. I agree w/ what previous posters have said -- certainly $8k/share is much more daunting than $8k/100 diluted shares. And I believe the splits must have (had) a positive effect, over time, on the stock's ability to appreciate (by increasing the # of folks who can buy the stock, thus increasing demand and allowing AOL owners to capture consumer surplus...) but does this suggest an artificial stock value boost? Or is a stock's value -- in this sector especially -- defined more as 'willingness to pay' than some discounted future cash flow analysis/more traditional valuation?

"I also am concerned that discussion of an AOL broad-band strategy has fallen to the way-side of late."

Finally, among those Fools bullish on AOL, I wondered if you might share some of the reasons for your continued enthusiasm. I want to be more enthusiastic, but this latest release has given me pause. If AOL is to be 'everywhere' then what steps do you think AOL will take to take it from 'here' to 'everywhere'? I anticipate that I'm missing something -- or many things -- though I follow AOL quite closely (as a primary holding) and tend to read this board faithfully. I struggle to see what new services AOL is offering now that will translate/correlate positively with stock price appreciation. I'm wondering where else I might access my AOL that would make it more useful to me and to others like me and not like me (my car, my watch, my PalmPilot...) -- thus increasing our reliance on it as a central part of our lives. I'm wondering when we'll start to see some of these new kinds of features -- or is YGM a (lame) example of them? And, I'm concerned about increased commoditization among the kinds of services AOL is claiming as its own. Check out York Color Labs for online access to photos, or GeoCities for a chance to share those photos w/ others over the web...

If you've made it to here in this message, I thank you for reading. Please take a moment to respond. I'm anxious to hear your thoughts.

Long on AOL,
Garcia