The AOL List: Rebellion

David Cassel (
Fri, 22 Nov 1996 18:27:46 -0800 (PST)

 			R e b e l l i o n


One of AOL's biggest content providers is leaving next Friday.  And
WebWeek writes that some of AOL's other content partners are so irate
about the move to flat-rate pricing, they're discussing forming a union.
Some are even shopping for a new home--the disgruntled business
development VP for AOL's Gay and Lesbian Community Forum told WebWeek
"We're looking around.  Do you know MSN's number? 

AOL's move to flat-rate pricing rankled its content providers, who feel
AOL tampered with their revenue models without any warning.  "[W]hat does
a partner mean?  They gave us zero advance notice," the GLCF exec
complained.  "We had no guidance from the company till they dropped the
bomb," concurred AOL's Motley Fool. 

WebWeek also ran an opinion piece about the company's future.  "There is a
big, growing demand for dial-up Internet service, and it stands to reason
that some company, someday, will make money servicing that demand," writes
Robert Hertzberg.  "But it won't be AOL."  He taunts AOL for an unworkable
model, and dares Steve Case to deny his conclusion:  that MTV's Robert
Pittman was brought in to help shop AOL for a buyer. 

The December issue of Wired has even harsher words for AOL--deriding its
"vaguely cutesy-poo environment where the ambience is serenely
antiseptic...and the impulse to consume is stimulated at every stop." 
Frank Rose writes that the service represents "the wired future as subject
to brand management" and "a Coca-Cola vision of 21st-century community." 
Noting AOL's "expensive if not necessarily profitable acquisitions" and
their "third-rate Web browser", he approaches the service from a business
perspective.  "AOL's strategy has been built on the notion that the Net
would remain a cult attraction, unsuited to a mass market that can't
handle anything more complicated than a VCR." 

But instead he finds is an increasingly grim outlook for proprietary
online services.  "If you look at this company using more conservative
accounting, you see a company that appears very sick" one business writer
told him.  Rose reports that 1/4 of AOL's profits comes from chat
("whatever your trip, AOL has a 900 number for you").  But that will
vanish overnight when the company switches to flat-rate pricing.  He cites
AOL's $100 million marketing campaign to prop up their subscriber base
("AOL's brief flirtation with caution ended") even though "the wave AOL
has ridden may not last."  He finally noted that Steve Case seemed
unflappable, despite the fact he ran a service with "relentless
commercialism...cheesy pop- ups...fuzzy-wuzzy icons that render it both
saccharine and bland" 

The automatic pricing switch was supposed to bring in $20 million a month. 
But instead, late Friday AOL reversed their position, and will now require
users to select a rate plan before they can access the service, C|Net
reported (rather than switching all users to $20 a month automatically).
This agreement was reached with Washington's attorney general; yet AOL
spent the day negotiating with the attorney general from Texas, who
pointedly told C|Net the agreement doesn't bind the 16 other state
attorneys general who voice their concerns--and he indicated Texas still
wasn't satisfied. 

The good news:  AOL's stock rose 14.75 % Friday (along with most other
high-tech stocks, due to a favorable prognosis for computer sales.) The
bad news:  Thursday the Ohio-based ISP "Exchange Network" warned users
that their mail to AOL isn't going through.  "We are working with AOL to
clear up a problem with their mailservers,"  their corporate manager wrote
in a letter to all users.  "They are receiving our email at the gateway
but it is not arriving in members boxes." 


"Bow, Wow." read the headline on Afternoon Line.  After less than
one-year, CompuServe's Wow! service, which had hoped to compete with AOL
for the consumer market, is going out of business

The ultimate irony:  WOW! started the month eWorld folded.

 	David Cassel
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