There is no shortage of bloggers offering advice and commentary on AOL's rumoured move to offer free services in search of increased advertising as it confronts falling subscriptions. Stowe Boyd is encouraging AOL CEO Johnathan Miller to "go open". Mathew Ingram, Toronto Globe and Mail, provides numbers on subscription reductions and revenue loss estimates if AOL changes its subscription model along with sceptism about AOL"s prospects.
As an employee of the PRODIGY Services Company, the IBM and Sears owned online service pioneer who watched AOL overtake us I can imagine the challenge AOL confronts. AOL CEO's reinvention list is long ranging from revamping AOL's maligned "Keep our customers hostage" customer service through brand perceptions, demographics, and stemming subscription losses.
Included in the Online Communities in Business study Joe Cothrel and I conducted in 2004 is a timeline that reminds us AOL's roots are deep in 1980's technology and online service business models. Download online_communities_in_business_timeline_june_2004.ppt The AOL site even offers a year by year evolution of the company starting as Quantum Computer Services in 1985.
AOL's struggles make clear the challenges to companies with legacy technologies and business models confronted with nimble new, younger companies. Yahoo faces the same challenge wtih Google. And now even MySpace, the social networking site phenomenom in which Fox invested $580mm just a year ago is confronting it's limitations. A CNBC report July 6 (not available on line) described MySpace losing its "cool factor" as major advertisers move in. Users are defecting to more niche sites.
A June 9 Knowledge@Wharton newsletter article "MySpace, Facebook and Other Social Networking Sites: Hot Today, Gone Tomorrow" addresses the business issue AOL and MySpace confront:
In all, an estimated 300 sites, including smaller ones such as StudyBreakers for high schoolers and Photobucket, a site for posting images, make up the social network universe.
Wharton marketing professor David Bell says the long-term success of these sites will depend on their ability to retain the interest of their members. “There is a fad or a fashion component to all these networks. Some will come and go,” says Bell. The classic example, he suggests, is Friendster, which burst onto the Internet in 2003 and soon had 20 million visitors. Late last year, it slipped below a million after MySpace and other sites with better music and video capability lured Friendster users away."
AOL CEO Johnathan Miller can take comfort in not being alone in efforts to revamp his 20 year old company and retain members. The management of high flying infant newcomers like MySpace face similar challenges.
~ Jenny Ambrozek