Post of the Day
September 23, 1998
America Online Folder
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Subject: Re: It's about content, too.
AtHome may be a new highway, but for many of those 15 million members, AOL will still be a destination.
Distinguishing the highway, or infrastructure, from the content of the web is an important decision for management to make. Aol's main source of current revenue comes from its service being an ISP... accessing AOL via TCP/IP is another, but less substantial source of income.
|"What I see is the online service [AOL is] now in a strange position of competing with itself."|
The initial internet wars were between the Online services... way back ten years ago into fast-paced web history--AOL, Prodigy, Compuserve, and later MSN, battled for the faith of its subjects, and AOL, of course, was throned as King. The business models of these companies shared the aspects of acting as ISP and content provider, as @Home does too. Now, however, with the emergence of Mindspring, Erols, Uunet, Worldnet, and many smaller, more local ISP's, along with the upsurge of content providers (or web hubs) like Lycos, Yahoo, and Excite--to name a few--the roles of internet companies and ideal business models is blurred.
As it stands AOL's business model is an integration of being an ISP and a content provider. The content aspect of their business may attract customers for a premium price over ISP's--but relatively speaking, is not a major source of revenue (this, however, is a whole different topic). AOL.com began as a gateway and is now focused on becoming a destination--contradicting Bob Pitman's statement that AOL.com is foremost for online members. What I see is the online service now in a strange position of competing with itself. Other ISP's users, AOL's competition, access AOL.com for content--users that Steve Case and the gang would much rather be using AOL.com as a gateway, rather than a destination. This, I believe, is the first schism which AOL must make to prepare its business model for up coming broadband content--they must stay focused on integrating its proprietary service with the web and make AOL.com solely a destination.
|"I do certainly agree that AOL has superior content, and as an AOL member would not give up that content unless something equal or better comes along."|
Yahoo and Lycos have proved that a profitable business model can come from being a content site. With Yahoo pager, and Lycos's communities, calenders, free stock quotes and investment research--becoming everyday more AOL-like, it is becoming more and more rational to access AOL at a cheaper rate from an independent ISP. I do certainly agree that AOL has superior content, and as an AOL member would not give up that content unless something equal or better comes along. @Home, however, is at a tremendous advantage over AOL because high speed will prove to equate itself with great content... imagine video conferencing, video -on-demand, gaming, etc... a few deals with network television stations and major media companies and @Home will blow AOL's content away. The speed is their, it is just the business deals that aren't--with the exception of Sega and @Home.
What AOL needs to do is break down its business model into parts--AOL through cable, and DSL; and AOL through 56K connections. It also must breakdown its content service into an AOL high speed proprietary service, for those accessing AOL from their own high speed ISP; and a high speed web destination--Speed.com or something, all of this running concurrent with the existing platform. The problem for AOL is that high speed access will create so much a better internet experience that the current AOL service just won't be able to compare. Communities of high speed users will want video-conference rooms, and won't wait for tedious keyboards users to say what they want. I've stated in an earlier post that @home grew its subscribers 67% quarter over quarter. That is phenomenal growth. There are many steps I imagine AOL to be taking right now--the acquisition of Netchannel, a service similar to webTV, being one of them. We'll just have to see.
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