Case: America Online. Inc.

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Case: America Online. Inc.
1.Prior to 1995, why was America Online (AOL) so successful in the commercial online industry relative to its competitors CompuServe and Prodigy? •AOL was able to gain more market share because of rapid advertisement expansion •The company agressively marketed its online service using both independent marketing efforts, such as direct mail packets with AOL software disks; television and print advertising; co-marketing efforts with computer magazine publishers, also with PC hardware and software producers. •Provided customers with exclusive content and products

Focused on maximizing customer subscription life, because the online market was competitive with various major players and it was rapidly changing

2.As of 1995, what are the key changes taking place in the commercial online industry? How are they likely to affect AOL’s future prospects?
Entry of new competitors like Microsoft Network (MSN) provided even more competition to the original oligopoly of three. MSN had a different approach to presenting internet content to subscribers. They also gave content providers a larger portion of subcriber revenues and more choice in the creation of their product offerings. •Implication to AOL’s future prospects- greater shift in marketing efforts to content providers •Emergence of the World Wide Web presented even greater challenges to AOL’s bottomline •Implication- customers can directly communicate their needs to content providers directly without having to go through a middlemen like AOL. AOL might face decrease in market presence because demand for its services may decline.

3.Was AOL’s policy to capitalise subscriber acquisition costs justified prior to 1995? •Yes, the policy is justified but it presents some areas where its debatable. •Subcribers can be viewed as ‘assets’ as there is expectation of future cash in-flows from them in the near future. Also, the company was able to justify the increase in the...
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