View Full Version : AOL: never short a topology company?

07-18-2002, 07:37 AM
As everyone has been saying for some time, AOL sells Internet dialup service - whatever online experience they may package with it - and broadband is getting cheaper and more mainstream every day.

Even the girls and pop-culture idiots I exchange emails with, one by one, have been ditching AOL and giving me notice of their new dot-net email addresses of various stripes. Anecdotal, yes, but revealing.

Frankly, AOL sucks, their browser is non-standard, they disconnect you, their price is at the high end of the market, and they don't own any broadband pipes or services that I know of. $29 for email?

So, the question is, what is Time Warner going to do with this huge subscriber base? What product are they going to plug in? What service are they going to offer them? What on Earth might they stumble onto?


07-18-2002, 11:29 AM
for years i held onto ted turners stock as i was sure it was undervalued. then time warner sucked them up and then fired ted. i made out okay but knew time warner was way overpriced and carried much too much debt. so i sold out immediately and watched it go thru the roof. but as time proves the piper catches up with you. this has nothing to do with the above post and girls ,browsers and sucking aol.

07-18-2002, 03:34 PM
There are a lot of valuable assets there. Broadband isn't getting cheaper and there are still a lot of idiots out there that will have AOL indefinitely. Its the crowd that buys the yellow "dummies" books you know. AOL won't grow their subscriber base by any big multiples, but these are people that still fork out $25/month for something that costs little to develop or serve to the people. If AOL had a lot of expanding to do it would be questionable, but they are in the phase now where you just pay for content or new features, much cheaper stuff than say building out a network or having to get into crazy marketing wars for customers. Giving a free month to new customers costs them almost nothing, their network can handle a lot of traffic except at the peak hours and as you say everyone is used to that traffic. So you ask what will they do with the AOL customers? Well if they just sit on it and use that base to sell to as they have been its a very nice lucrative cash flow that isn't going away. The people that get broadband are not heavily AOL customers. Those they lose to broadband they often get a cut from since they sell that access through other providers and those new people they pick up outnumber those they lose. While it seems a commodity, AOL clearly has some name brand appeal, otherwise people would have jumped onto Juno when it began offering the $10/month service.

Stock isn't particularly attractive, yet I don't think it has a lot of hot air to be let out either. Best strategy clearly is to break these two up again, the idea of buying content quite clearly hasn't played out. What seems obvious now is the best strategy is just get big enough to demand cheaper pricing and buy the content for your traffic needs. By focusing in only on Time-Warner stuff, AOL loses out the chance to be involved with better assets such as ESPN for sports and the multitude of categories of news, especially financial, where CNN isn't that big of a player. Back when this deal was made, I thought of a nice little trick. You see, everyone was getting to the point where they thought they had to buy content or else get shut out. People thought MSN would be in the pockets of someone, AOL someone else, etc. Well here is what AOL should have done. Not buy content, but keep growing base. With a huge base to work with, go negotiate with anyone MSN tried to get an exclusive deal with. If the supplier refused to do business with them due to MSN contract, sue them on anti-trust grounds and make Bill Gates and company fight yet another lawsuit.

07-18-2002, 08:04 PM
aol-time warner has problems but its reflected in stock price i think. problem with aol online business is that subscriber rates are not expected to increase over the long haul. aol was able to put in a price increase to subscribers recently. good article in the wsj this morning about problems at the company that is definitely worth reading. you want a laugh there is talk now about the merged company doing a spin off of the online business or making it a tracking stock. it seems that the synergies between the merged companies specifically in regards to advertising revenue did not develop. ceo told all business units to go their own way pre-merger. wsj compared the new ceo edict to what ge does now.