Opinion

AOL - a case of of adapting in order to thrive



How times change. A couple of years ago, the conventional wisdom was that America Online (AOL) was doomed. Now it is apparently so rich it can afford a huge string of top quality brand names - Time, Fortune, Warner Brothers, HBO, Sports Illustrated, CNN and many more - in the biggest takeover the world has ever seen.

The prophecies of doom were based on the fact that AOL provided an expensive, proprietary online service. Clearly it would not be able to compete with Internet service providers (ISPs) who could offer access to the entire World-Wide Web.

AOL, of course, adapted, and did more than survive. It switched to a flat-rate charging system, stopped paying for content, and added Web access, becoming by far the biggest ISP itself.

No other company has anything like AOL's 20 million subscribers, which (since each account can support up to five people) probably adds up to 40-50 million users. This is a large slice of the Internet.

Don't think for a minute that AOL has stopped expanding. It is only operating in a handful of countries outside the US. There are still vast areas where users would welcome the arrival of a service that is so simple Noddy could use it.

And don't expect AOL boss Steve Case to stop acquiring companies, either. He has already swallowed Global Network Navigator, CompuServe, Mirabilis (for the ICQ messaging service), Netscape Communications, MovieFone, Winamp and now Time Warner. There are more where they came from.

It certainly makes sense for "Internet companies" like AOL to use their overvalued shares to acquire traditional firms with plenty of turnover and real assets - and to do it as soon as possible. When the .com market bubble bursts and the price of Net stocks falls through the floor, that will no longer be an option.

Jack Schofield is computer editor of The Guardian

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This was first published in January 2000

 

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