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A potent revenue mix of advertising, subscription, and e-commerce has America Online sitting pretty, says its new CEO. Don't blame AOL if other Net companies were slow to catch on to this multiple-stream model.
Is Barry M. Schuler the last optimist in dot-com land? The just promoted CEO of America Online shrugs off the meltdown that's clobbering one-time Net stalwarts, from Amazon.com to Yahoo! "There is no shakeout with consumers," says Schuler. "There is no retrenchment. It's all straight-ahead up."
Easy for him to say? Schuler ticks off AOL's own growth statistics to make his point that the shakeout rocking online businesses isn't souring consumers on the the Net. Since the end of 2000, the Dulles (Va.) online service -- the crown jewel of newly merged AOL Time Warner Inc. -- has added 2 million new subscribers, increasing membership to 28 million AOL users (see "AOL Time Warner: Who's Laughing Now?").
"DESTINED TO BURST." Average usage on the AOL network tops 70 minutes a day, up from 14 minutes four years ago -- and more than five times longer than the average amount of time users spend on No. 2-ranked Microsoft Network. During the holiday shopping season, AOL says its members spent $20 billion on e-commerce, an 83% jump from 1999. That track record, says Schuler, proves "consumers are coming into the Internet more and more. They're baking it into their lives."
The decimation of the dot-com landscape was inevitable and probably healthy, he believes. "The shakeout is really a Wall Street shakeout that is coming after speculation in businesses that had no clear business model. That bubble was destined to burst."
Many Net companies were launched with misguided assumptions, says Schuler. "Crazy ideas like giving things away for free and making it up in advertising -- which has been the overriding principle of the Internet -- is just a terrible idea. It doesn't make business sense." AOL Time Warner, by contrast, is sitting relatively pretty with a comfortable mix of advertising, subscription, and e-commerce revenues. "We've always said a multiple-stream model is better."
Schuler brushes off the notion that the dot-com debacle on Wall Street will set back innovation in cyberspace. "We're at the beginning of a new era -- wireless, interactive television -- that will stimulate new innovation and growth," the New Jersey native says. "There is always money available for good ideas that have plans that make sense and can turn into real businesses." Optimistic words, with so many other dot-coms sinking fast.
By Amy Borrus in Washington Edited by Douglas Harbrecht
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Copyright 2001, Bloomberg L.P.
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