Post of the Day
March 20, 1998

From our AOL
America Online Board


Subject: Re: Yahoo > AOL...Yeah Right!
Author: TMF Nico

[Nico quotes a previous post]

"Lets look at previous match ups:

CompuServe vs. AOL   Who won?  AOL
Prodigy vs. AOL   Who won?  AOL
Mom & Pop Providers vs. AOL   Who won?  AOL
MSFT vs. AOL   Who won?  AOL

AOL has killed Microsoft...Microsoft wins at everything, but AOL is the market leader!

If AOL can beat Mr. Softy then surely YAHOO, a (search engine!) and a MCI, (a long distance company with the worst commercials I have ever seen!) will not beat AOL.

Phew...No sweat here, I am in AOL for at least the next 3 years."

No sweat... 3 years... Phew... That's what I call a long lasting anti-perspirant!

As an investor in AOL, I generally picture Steve 'n' Bob as cool, calm, and collected. But, also as an investor in AOL, I do hope their brows bead-up from time to time as well, and not only when knocking down little old ladies on their way to the Online World Championships.

Re: the above scorecard from the previous match-ups, how bout a little ringside analysis?

*** CompuServe vs. AOL ***

If AOL is no more than half what some of its more enthusiastic boosters claim, CompuServe was still not a worthy competitor in the Windows era, aka "the 90's." The CompuServe interface remained text-based too long, and the Windows version was not very good. The service itself had no style. H&R Block, CompuServe's parent, responded belatedly and feebly if at all to AOL's arrival and ascendancy. Despite the vision implicit in acquiring CompuServe in the first place, the income tax preparation company had no commitment to the service and apparently no idea what it was or what it might become. There were several new beginnings and even more false endings in the final years. The frittering of resources and good will continued beyond the announcement of the WorldCom-AOL deal, right into the weeks leading up to the closing of that deal and CompuServe's final dismantling. But yes, AOL won.

*** Prodigy vs. AOL ***

Prodigy was born with a silver spoon in its mouth but under a bad sign, the homely and eventually abandoned child of a well-intentioned marriage between IBM and Sears. It should be noted, however, that Prodigy was ahead of its time in two important respects. First, it was integrating advertisements into its pages/screens years ago, grossly over-anticipating the online business model we are today hanging our portfolios on. And I do mean grossly: Prodigy's ad-splotched pages were intrusive and a turn-off to many. They made the already klunky non-Windows-or-Mac graphical interface even klunkier. An impressive feat, but a cheap cigar at best. Second, Prodigy offered its customers web access and an integrated browser before any other consumer "online service," representing one of the more notable times AOL has found itself playing catch-up, which is not necessarily a bad position to be in. Prodigy was a good experiment, but not even mom's and dad's billions could save it. It tried hard, but proved to be badly non-competitive and a mismatch with AOL. At some point Prodigy went out on its own, putting its parents out of their misery. Today, I figure it's a toss up whether more people know Prodigy as an Internet service positioned somewhere between MindSpring and AOL, or as techno-punk band positioned somewhere between Nine Inch Nails and Art of Noise. But yes, AOL won.

*** Mom & Pop vs. AOL ***

The idea of a Mom & Pop ISP as a serious "match-up" with AOL is to laff. Any that tried (and just how would you do that, anyway?) would get their dotcom handed to them. A martyrdom to hubris it might be, but hardly a show of AOL's invincible strength. Besides, ISPs, as such, are not and have never been in direct competition with America Online, as such (something which is forgotten, when convenient, by AOL bulls and bears alike.) In the end, the relationship between AOL and the consolidating ISPs will prove to be cooperative and mutually beneficial. By the way, according to recently published statistics from Forrester Research, 77% of local ISPs are profitable, as opposed to 7% of national providers. Match called, no contest.

*** Microsoft vs. AOL ***

I'd think you were kidding, except the idea that "AOL killed Microsoft" turns up with great regularity. Those scanning the horizon looking for an AOL killer that walks and talks like AOL are waiting for a no-show. Not gonna happen. AOL is unique, which is both a strength and a weakness. More to the point, both AOL and Microsoft are flexible and strategically responsive organizations. In constant motion. (They are also very different from each other.) There is plenty to be learned from their separate but occasionally intersecting evolutions. But the Microsoft Network of 1995 is no more relevant to today's discussion than is the AOL of 1995. However, this year's models of both are very much alive and kicking, cooperating and competing from their respective positions of mutual distrust and envy. Grudge match, ongoing.

" ...YAHOO, a (search engine!) and a MCI, (a long distance company with the worst commercials I have ever seen!) will not beat AOL."

See above, Microsoft vs. AOL, for comments re: "AOL killer."

Just out of curiosity, what would it mean for Yahoo (a cough... cough... search engine) and MCI (a long distance company with a bad haircut) to "beat AOL?" What would it take? What would that outcome look like? What would prevent it from happening? Are AOL and its users doomed to an existence without "real competition?"

TMF Nico


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