BUSINESSWEEK ONLINE : JANUARY 15, 2001 ISSUE
COVER STORY AOL Abroad: Miles to Go (int'l edition) Its foreign operations need more attention Boris Becker may be fearsome on the tennis court, but gosh, he sure looks confused by this Internet thing. Then the German sports idol gets America Online. A few clicks, and the familiar blue triangle pops onto his PC screen. ''I'm in!'' cries Becker in a German TV spot promoting the portal, which in Germany runs customized channels on topics like finance, travel, and sports, just as it does in the U.S. The strategy of offering special content and easy access has boosted AOL subscriptions 60% in the past year, to 3.9 million, in Europe. Still, AOL subscriber numbers lag behind the big telecom companies. In Germany, for example, anyone who upgrades to Deutsche Telekom's high-speed digital phone service automatically gets a subscription to T-Online, the company's Internet access provider. Elsewhere in Japan and Latin America, AOL is still small potatoes. Yet AOL Time Warner boss Robert W. Pittman wants AOL to succeed overseas. When AOL memberships in the U.S. peak, growth has to come from somewhere. So AOL is forging ahead. Company executives predict a boom as European countries finally move toward flat-rate local phone service. That will allow people to surf as long as they want without paying extra phone charges. In Britain, AOL usage doubled to an average of an hour a day with the introduction of flat rates, says Michael Lynton, president of AOL International. When rates drop, he says, ''the Net becomes a mass-market product, where AOL succeeds.'' KEY TASK. America Online Inc. needs to pile up foreign subscribers for its fixed-line service to prepare for the spread of the Internet from PCs to TVs, handheld computers, and--especially in Europe--mobile phones. If AOL can create a mobile online world as friendly as the one it created for PCs, it could finally bust ahead of competitors. For AOL, the key will be to exploit its expertise in packaging content, which keeps its German subscribers, for example, online nearly four times as long as T-Online users. AOL is also lining up partners such as Carphone Warehouse Group PLC, the British-based mobile-phone retailer, and British Telecommunications PLC's Genie service, which provides mobile Internet access. The biggest growth potential for mobile services is probably in Asia and Latin America. There, mobile phones offer cheap access to millions of people who can't afford PCs. Yet in Japan, AOL is a weak player, with only 400,000 fixed-line subscribers. A key weapon may be AOL's alliance in Japan with mobile-phone operator NTT DoCoMo. The deal gives AOL a chance to learn from the only company that has helped create a mobile Internet with mass appeal, thanks to the DoCoMo i-mode service. AOL is also in talks with Dutch telecom company KPN Mobile, DoCoMo's European partner. That could give AOL important access in Germany, where KPN owns No. 3 mobile service provider E-Plus. ''AOL has to develop services specifically for the wireless market, so it needs to get close to operators,'' says Kiyoyuki Tsujimura, DoCoMo's global strategist. Tsujimura sees plenty in the deal for DoCoMo as well. DoCoMo hopes to tap Time Warner's music, movies, cartoons, and more. AOL can help DoCoMo deliver service too: Japanese can reserve a plane ticket by visiting an AOL site from their desktop PCs, then be notified on their handsets when the tickets are ready to be picked up at the closest travel office. Already in Europe, an AOL service cuts between the fixed line and mobile world by letting people send short messages from AOL screens to mobile phones. Yet AOL also faces competition from other content providers. Adversary No. 1 may be Bertelsmann, until earlier this year 50-50 partner in AOL Europe and still a provider of content to the American portal. Yet the Time-Warner union compelled Bertelsmann to sell its stake in AOL Europe, and AOL Europe chief Andreas Schmidt has bolted to Bertelsmann, where he plans to use the mobile Net to steer users to his company's online book and music shops. AOL has to get its own house in order overseas: The company still hasn't replaced Schmidt. Lynton is running AOL Europe from New York, and insiders say the U.S. managers are too preoccupied to pay attention to international. Lynton denies there's any management drift. And AOL does have a great product, abroad as well as at home. But AOL's foreign adventure will need constant, loving attention to achieve its goals. By Jack Ewing in Frankfurt and Catherine Yang in Washington, with Irene M. Kunii in Tokyo and bureau reports _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Show Time for AOL Time Warner COVER IMAGE: Show Time! TABLE: Can These Two Make the Marriage Work? TABLE: Pittman's Highest Hurdles TABLE: What They're Saying about Pittman RESUME: Robert Warren Pittman The Man Who Made Levin Look Good TABLE: Pittman's Co-Pilot AOL Abroad: Miles to Go (int'l edition) TABLE: A Global Report Card INTERACT E-Mail to Business Week Online

Copyright 2000-2008, by The McGraw-Hill Companies Inc. All rights reserved. Terms of Use   Privacy Notice