300 an Hour!

11:30 AM –- AOL's got problems. Even with a huge boost in ad revenues, the online service can't stop people from heading to the exits. The new VOIP services and other fancy add-ons aren't even making a dent in the mess that AOL has become.

AOL revenues declined by $100 million, to $2 billion for the quarter, even though it saw a $71 million increase in ad revenues. The company saw its subscription revenues fall by $175 million. From the press release:

As of September 30, the AOL service totaled 20.1 million U.S. members, a decline of 678,000 from the prior quarter and 2.6 million from the year-ago quarter. In Europe, the AOL service had 6.1 million members, a decrease of 98,000 from the previous quarter and a decline of 170,000 from last year's quarter.
For a business of any size to lose 678,000 customers in three months -- that's more than 300 subscribers an hour -- you have to be doing something wrong. Maybe everything.

— Phil Harvey, Numbas Editor, Light Reading

DocGonzo 12/5/2012 | 2:55:22 AM
re: 300 an Hour! AOL historically had high subscriber turnover rates, but they were able to replenish them and grow with newly acquired ones. Many people new to networking used AOL to get online with a minimal amount of knowledge/effort albeit at dial access speed. As broadband internet access becomes cheaper and more pervasive I expect AOL will continue to see subscriber losses. At some point there will be a plateau as there are a number of people that still find their service of value. Who knows what that number will be, but I bet it will not be large enough to support the current size of the company. No doubt they see this coming and are trying to re-invent AOL into something more along the lines of Google and Yahoo...time will tell.

DCITDave 12/5/2012 | 2:55:21 AM
re: 300 an Hour! What does AOL provide that's any more valuable than what you can get for free or cheaper on the Internet?
stephencooke 12/5/2012 | 2:55:20 AM
re: 300 an Hour! One of the things that AOL still has is very large modem banks. For someone that travels to places that don't necessarily have WiFi or other HS Internet connections, it is an option that is generally cheaper than leased line-based dial-in VPNs. Granted this market is getting smaller by the minute worldwide.

paolo.franzoi 12/5/2012 | 2:55:20 AM
re: 300 an Hour!
They used to provide private content and marketed their service as very kid friendly in many ways.

Now, shrug they have the name. And they have the name. Hmmm, and they have this name.

I think that is the issue. The value they brought has gone away and they can no longer justify a premium. Thus, they are not doing something wrong. They are doing nothing right.

paolo.franzoi 12/5/2012 | 2:55:18 AM
re: 300 an Hour!
AOL charges more money to be your ISP than other ISPs. It had premium services, these are now commodities.

Given that you pay more (and how much do you pay to Yahoo!?) and you get the same, AOL is slowly declining.

PO 12/5/2012 | 2:55:18 AM
re: 300 an Hour! Doesn't AOL also offer competent "parental controls"? As well, don't they stack up competently against other ISPs for their email offering (including spam control) and general web access "portal" features?

Then there's supposed to be some specialized multimedia content and decent compression technology, but I wouldn't know for sure about that, not being an AOL member, myself.

I'm not intending to suggest these are necessarily reasons to select AOL - particularly if you're already paying an ISP in order to reach them. But then again, I can't think of a single thing that Yahoo (sorry, "Yahoo!") offers anyone to justify any visits to their site, but they're still seemingly quite successful.
DCITDave 12/5/2012 | 2:55:05 AM
re: 300 an Hour! re: "I can't think of a single thing that Yahoo (sorry, "Yahoo!") offers anyone to justify any visits to their site, but they're still seemingly quite successful."

Interesting comment. Maybe the way to play the Internet destination game is not to try and be a portal (one stop, all things), but to do one thing (search, Google) really well.

Or just offer porn.

I don't know.

Scand 12/5/2012 | 2:54:01 AM
re: 300 an Hour! People are shifting from dial-up connection to DSL
As long as it wasn't critical for ISP to own the access network on a dial-up business model, they are in a bad shape if they don't own the DSLAM today

AOL, at least on some of its major European markets is taking the heat. They have to resell broadband at zero margin and still can't have an appealing commercial offer.

The network operators are launching their own broadband triple-play offers and they will soon squize the ISPs out of the equation.

That is what I see in Europe but I don't know the market dynamics in the US.

DCITDave 12/5/2012 | 2:53:58 AM
re: 300 an Hour! AOL seems to have the same troubles in the US. Nothing compelling enough to merit subscribing by itself. And they can't make money offering broadband connections in addition to their content, etc.

Pretty lame business model, really.

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