I'm pretty sure a good chunk of their profits are coming from people who have gone years without realizing they can cancel their "AOL" and still have access to the internet via the DSL/Cable they are paying the phone/cable company for.
I don't know...this sounds apocryphal. I've seen the occasional AOL email address but I've haven't seen anyone claim they use AOL for internet in years.
There are far more than "occasional" AOL email addresses...
I just checked mailing list stats for our largest UK customer - where AOL never reached penetration anywhere near the US - and while AOL is by no means huge, they're the fourth largest e-mail provider represented on their list, after Hotmail (which out-distances everyone by a wide margin in the UK) and Gmail / Yahoo (which one is in second depends on whether you count Yahoo's various partnerships - they provide e-mail and other content services for some major ISPs).
Techies in particular tends to get very surprised when they realize that the entire world don't use Gmail... (gmail accounts for about 9%-10% of the subscribers on that list, compared to about 35% for Hotmail...)
This is a restaurant chain that covers a pretty good cross section of the UK, with a list of near a million users.
Sort of. AOL Broadband is actually a brand operated by Talk Talk. They acquired AOL UK excluding the content business back in 2006.
You're right that probably does account for a lot of AOL addresses, though. But the size of Talk Talk as a whole (don't know the breakdown between the Talk Talk brand and AOL brand for their ADSL) is too small to account for even a majority of the AOL addresses, and there are disproportionally many AOL addresses vs. market share compared to other operators like BT.
People want offers. We're in the process of helping them clean up their mailing list at the moment, and the open rate is rapidly getting to the 30% range for ordinary offer e-mails and coupons, and much more for "special" offers (like 50% off vouchers).
Especially since the financial crisis, people have been very budget conscious, and a lot of people are on these mailinglists to get offers for lunch etc.
We actually have a nice timeline of the crisis: When Lehmans toppled, bookings at the restaurants of our clients near their building shot through the roof. And looking back at bounce stats, we can tell which firms had large layoffs when, as we suddenly had 30% of addresses at one city firm bounce, 50% of another, and so on.
My mom. She was still paying for AOL until about a year ago, despite them having broadband since 2000. She thought it was her internet. I finally convinced her to start using gmail, but I think she still pays for AOL. Also, now she thinks google is her internet.
My dad as well. I have set him up accounts a couple of different times and tried forcing use by only email the gmail address. Yet every time I get an email from him, its from that flipping AOL account.
Yet, I install Opera four years ago and come home to find its become his default browser and he knows the hotkeys better than I do. Go figure...
They don't, but they're not the type to check their bills either. I did collections in college for AT&T Consumer Lease phones. These people have been paying to rent their phones (6-20 dollars a MONTH), still, 20-30 years after the breakup of their monopoly. Their kids had been paying the bills for them as their parents were incapacitated. It was pretty terrible.
My parents up until 2010 did not switch to a high-speed ISP and continued to use AOL dialup until 2008, which is when they switched to NetZero which was marginally faster but far cheaper.
In some ways, perhaps dial-up is a better proposition than DSL or cable due to its slowness. It does discourage distraction and waste of time on the net, and since I don't browse YouTube and use
links2 -g
to browse the web, perhaps it isn't such a bad idea. Although, I would have to go to Starbucks whenever I wanted to download a new Linux distro. ;)
As for email, I still do use an AOL email address. I use it for Facebook and AIM, but I use my Hotmail (now "Outlook") for personal email and inquiries.
But AIM. Can't live without it.
If AOL calls it quits on AIM, I will probably shed a few tears. There is nothing like AIM left. Facebook is locked-down and doesn't support buddy lists, MSN is dead, Skype is proprietary and forces you to use its own client, and nobody I know has a Google Talk account and my IM client doesn't support it, even though I've tried to set it up as a Jabber/XMPP account.
In addition to the practical merits you've listed, nothing else sips bandwidth quite like AIM. Despite being the champion of open-source communication, XMPP is fairly awful on low-bandwidth, high-latency links. AIM, partially as a product of the era in which it was engineered, doesn't care a bit.
On the contrary I found the internet more addictive on dial up. You waited so long for a webpage to load that the reward/payoff of finally getting what you wanted made you want to do it again. Along came broadband and an hours worth of browsing probably dropped to 15 minutes. Especially if you're looking for something very specific that involves lots of searching and narrowing your search based on information from other results.
Among my social group, everyone now uses Facebook Chat, iMessages, or Google Talk. I think I only have one or two people still on AIM. I think the problem with AIM is the lack of a default mobile client. Everyone's phone has Facebook installed, or comes with either iMessages or Google Talk. Nobody bothers to install an AIM client (I'm not even sure if there's an official one, and if it supports Push notifications)
That's really interesting, our social networks are very different: Basically no one I know uses AIM anymore (In highschool it was the only thing) but as I started playing games with others I used MSN, QQ, ICQ, IIRC, but now most of my friends are college grads and have gmail accounts so gchat/gtalk is it. It's kind of sad to log into AIM and no one be there, it's like a graveyard.
My dad still pays despite having Comcast since forever. He thinks he'll lose his email he's had forever if he cancels. I've tried many times to convince him otherwise but.. some people just don't get technology and the Internet.
Some data for fun. I run programming related mailing lists, all formed since 2009. I have 113k-ish subscribers and just checked and have 105 @aol.com subscribers.. so a whole 0.09% in that highly technical demographic.
I'm guessing you're a smart person and have never done tech support for cable or dsl? Every other call is from some granny who can't check her AOL email because the cable is out.
Seriously, there are massive swaths of people out there who pay for high speed internet _and_ AOL because they just don't know any better.
No, I don't do that job anymore (yay!). And no, I never explained to any of those people they are being stupid.
So basically technically illiterate people are subsidizing Engadget and Huffing Post and a bunch of others. I should send my résumé over while the gravy train is chugging along.
I just explained this to my aunt and uncle who have been paying for AOL for 18 months because they thought they'd have to have their AT&T service setup again.
This is what makes stuff like closing AOL Music even sadder- AOL is in a really weird position where they're making a ton of money where they shouldn't be- they are in a prime position to do some really interesting things on the net. But they don't.
It's actually pretty much the main problem with capitalism. Innovation often drives prices down, and prices going down means less profit, so at a point, there is an absolute disincentive to innovate. Obviously in theory people would leave the inferior product, but that is clearly not the case in situations like this.
Actually, the more free a market is the less of a problem this becomes. For every Blockbuster Inc. out there perfectly happy with the way things are now, the free market tends to produce three or four Nexflixes who are more than happy to cut margins, innovate and broaden the market.
Of course, with monopolies you get the kind of perverse incentives you're describing. Phone technology and prices stagnated for a decade or two when Bell had a de facto monopoly. I would still argue that a free market tends to produce fewer monopolies than any other practical regulatory scheme, but that's a topic for another post.
It happens in any type of economic system, except in capitalism, it happens much slower. I'd prefer eventual stagnation with the possibility of reviving innovation to a forced stagnation by a particular economic system.
I wouldn't consider capitalism an economic system. It is more of a description of the behavior of organisms. Free markets naturally produce monopolies just like humans have monopolized Earth. Once the monopoly is achieved, the motivation to innovate diminishes along with the entity's competitiveness. Eventually, someone will challenge the monopoly-holding alpha entity and the cycle continues. It happens in economies, societies, ecosystems, and any domain where evolution takes place.
This doesn't make sense. Innovation CAN drive prices down lowering costs. Lower prices lead to increased sales and market share. When prices reach near zero there is certainly a disincentive to innovate, and that is not a "problem". The fact that some consumers don't take advantage if innovation - broadband Internet for the same price as their old dial up - is the problem here. This has nothing to do with any fundamental flaw in capitalism.
AOL has bet the future on Patch.com or at least that's how it looks with Armstrong riding nine figure losses and hanging on to the shiny sheriff's badge over there for another platform pivot!
You should have an asterix next to "making a ton of money."
*Past performance is not indicative of future results!
So, the revenue from their subscriptions/AIM customers is not merely the only thing which is profitable for them, but the other lines of business are all run at a loss.
The rest of the company has a negative profit (loss). For example, with made up numbers: $100mm profit from subscription division + $50mm net loss from advertising business = $50mm total profit, but 200% of that total profit comes from the subscriptions.
What this is saying is that subscriptions are making more money for AOL overall than the other ventures are losing, so they are making profit above and beyond other losses (as opposed to breaking them even.)
It's a shorthand way for the writer to say that subscriptions are such a cash cow, it really doesn't matter what the other divisions are doing.
Maybe the amount of profit from those two equals say a number that is 120% of their total net profit, but losses in other divisions bring their total net profit down.
Therefore, the profits of those two divisions is greater than the profit of the company?
I find it hard to believe those media properties like Huffpo are losing money. I didn't read their financial statements but I wonder if it's just a financial artifact caused by deprecation/amortization. They bought Huffpo for $315m a few years ago for example... if they're amortizing that over several years, they could really be printing money but ending up with an accounting loss.
I'd like to think my friends realized that HuffPo was a vile pit of tabloid trash (independent of their pandery political positioning) and content farming. I WANT TO BELIEVE. Don't take this away from me!
I don't find it hard to believe: If you had a massive revenue stream coming in from a product that you know is dying, you might be happy just to milk it and close up shop when it dries up, or you might decide to throw a large chunk of your earnings from that division into trying to grow your other businesses, at the expense of profitability, in the hope of being able to make solid profits from them when you scale back on the "growth at all cost" expenditure down the line. Whether or not they'll succeed at that is another matter.
Goodwill does not depreciate, thus your accounting explanation doesn't make sense. Huffpo cannot be that profitable because their ad inventory is total garbage. That site is probably worth less than $1 CPM. They probably make a mere million dollar per billion page views.
I guess they just have enormous expenses — tons of people on the payroll, nice offices, etc. — and don't pull in enough advertising revenue to break even.
Just goes to show how hard it is to monetize on ads. Any startup that tries to monetize on ads is basically betting on becoming Google or Facebook level big.
Stock A rising more than stock B only means that the market has been more pleasantly surprised about A than B.
So given that the point of the article is "AOL is doing surprisingly well thanks to low expectations", it'd be natural that the stock would gain more than companies that people expect more from.
Also, I'd have a hard time calling AOL successful (which the article does). They're net profitable, but on something that's doomed. And the thing that's supposed to save them, selling ads against content, is looking pretty sickly as well. Profit is correlated with success, but they're definitely different.
Also the chart only dates back 1 year... why not do a 5 year comparison? Oh right.. because Apple stock has outperformed AOL by a factor of 2 even with the recent 30% dive in market value.
I was just asked for an Interview by AOL for their Streaming Media business. The recruiter told me that the media business was totally profitable as I questioned AOLs future.
I guess now, in hindsight, im glad they were working with tech I didn't want to put my hands into or someday, I would be looking for another job.
Revenue for that division/activity happens to be larger than overall company-wide profit. The author's use of "accounts for" implies some sort of causality, but I suspect literary flourish and innumeracy.
I've seen this many, many times.