America Online. Inc Case Study Q1. Prior to 1995, why was America Online so successful in the commercia l online industry relative to its competitors CompuSer ve and Prodigy? America Online (AOL) was successful because it provided a broad range of features (online community, educational domains, news and personal finance information, interactive travel and shopping services, entertainment and children’s programming) that met t he needs of its 4M subscribers. In addition, it was to easy for subscribers to understand its rate structure (monthly fee of 9.95 which included up to five hours each month plus an addition hour was 2.95) compared to its competitors. Furthermore, AOL realised that its prima ry revenue driver were membership fees. Ma ny of AOL’s initiatives concentrated on attracting and retaining subscribers. These included direct mail packets with AOL software disks, television and print advertising featuring a toll-free telephone for ordering the AOL software and bundling AOL software with computer products. Finally, AOL had a strong business strategy. It wa s planning on exploiting new business opportunities, investing in the growth of its existing services, providing a greater range of interactive services, all whilst maintaining technological flexibility. Q2. As of 1995, what are the key changes taking place in the commercial online industry? How are the likely to affect AOL’s future prospects? Online consumer services industry represents 1.1B in revenue in 1994, and is expected to grow by 30% to 1.4B. AOL, CompuServe and Prodigy have capit alised on this revenue by successfully acting as middlemen between content providers and subscribers. However there are certain changes taking place in the industry that are likely to affect AOL’s prospects. The introduction of the internet world wide web, and the entrance of Microsoft Network means that content providers have alternative distribution channels, apart from AOL, CompuServe and Prodigy. Many content providers are transferring over to MSN and the internet world wide web because these avenues allow them more creative control, and potentiall y higher
