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Analyze This: Aol Rules!


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Analyze This: AOL Rules!

Its 21 million customers don't care what the critics say--they like the content

Has there ever been any occupation more popular among Internet cognoscenti than dumping on America Online Inc.? It has been happening since I began covering high tech--back in the olden days when I walked six miles through the snow to get to press conferences. The bashing continues to this day. There's only one problem: AOL has all the customers, and the critics don't.

It's not just that 21 million people buy Web access from AOL: They also use AOL content. Every month, Media Metrix puts out Web audience ratings, and AOL sweeps. The top personal finance site is the AOL Personal Finance channel. The top health-care site is AOL Health channel. AOL is tops in travel, sports--you get the picture. How can the "Internet on training wheels," as AOL has been called, hand out these beatings so routinely? Could it actually know something?

In a word, yes. I compared three AOL channels--AOL Computing, AOL Personal Finance, and AOL Health--to top-rated non-AOL sites in Media Metrix' January ratings. The comparison sites are ZDNet in computers, OnHealth.com in health, and Microsoft MoneyCentral in finance. AOL isn't better in every case. On balance, MoneyCentral tops AOL's channel. ZDNet isn't better or worse, it's just different. The truly bad OnHealth makes the comparison for AOL a little too easy. Either way, AOL is always solid. Why? AOL knows its audience and knows how to pitch programming that meets its needs. AOL has what a lot of the Web lacks: discipline.AOL Personal Finance vs. Money Central. Both sites are solid, but Personal Finance is a good example of AOL's Tom Sawyer approach to serving online users. Just as Twain's hero convinced pals it would be fun to whitewash Tom's fence for him, so AOL has persuaded some of the Web's best business-information providers to pay AOL for the privilege of making AOL personal finance as good as any leader in this niche.

Everyone wants to deal with AOL because everyone wants AOL's customers. AOL chalks up the payments as ad revenue. Want tax information? AOL gets its from Intuit Inc., which also is a competitor. Insurance? AOL is teamed with InsWeb. Real Estate? AOL has Realtor.com's listings, Quicken's online mortgages, and interest-rate information from bankrate.com. And so on, through a long list of brands as good as the Web can offer. AOL has them because AOL has, bluntly, you. Until AOL loses its control of the customer, it'll have all the content it needs. Its job is to organize it.

Microsoft covers a lot of the same ground, but it paints its own fence, thanks very much. It has partnerships both with information companies and with financial services providers. But what makes it different from AOL Personal Finance is that it has news and opinion you can't find anywhere else. MoneyCentral offers more diverse voices and perspectives while covering pretty much the same e-commerce bases as AOL. It's closer to the pleasant, brainy cacophony that is the Web at its best.AOL Health vs. OnHealth.com. Alice Roosevelt Longworth had embroidered on her favorite couch pillow: "If you haven't got anything nice to say, come sit next to me." Do that, and I'll talk about OnHealth.com.

Most health sites, including these two, offer news, chat areas for people who share medical problems, and background research on common illnesses. The difference is the stories they pick and what that says about how each views its audience. At OnHealth, which aims for a chatty tone and a New Age view of health, the front page was anchored by a story headlined "Bowl That Man Right Out of Your Life." The point was that having fun reduces stress, but me, I think of bowling alleys as places where I get very little exercise and a great number of nachos. Not healthy. Which brings me to OnHealth's second lead story: "Flatulence: It's No Laughing Matter." Complete, I might add, with an interactive poll on what one should do if one passes gas in a crowded room. Now, is anyone still arguing that it's AOL dumbing down the Web?

AOL's top health story the same day was about a federal crackdown on gene therapy trials. AOL's poll was on users' experience with medical errors, which a recent study found cause almost 100,000 U.S. deaths annually. The approach fits AOL's audience, which is 61% more likely to have a college degree than Americans generally, and 73% more likely to earn $100,000 a year. It's smart news for smart people.AOL vs. ZDNet. On the surface, they don't have much in common, but here's what they share: Both know their target audience. Which you prefer depends on why you follow computing.

ZDNet is for serious computer users. You would rarely find reviews of enterprise-grade encryption systems or analyses of wireless network protocol disputes on AOL, but they make sense for ZDNet's audience. AOL, instead, looks a lot like consumer-oriented CNET.com. In fact, AOL Computing more or less is CNET.com repackaged. It's one of those Tom Sawyer deals. People whose interest in computing is buying dot-com stocks and home computers will find AOL more useful and less intimidating than ZDNet.

Now here's the real question: Does AOL's pending merger with Time Warner Inc. help improve AOL's content ? The answer: not a lot. Since AOL gets most of its content from partnerships (including one with BUSINESS WEEK), it's hard to believe content had much to do with paying $165 billion. AOL already can get any Time Warner content it wants. Rivals think AOL paid to get Time Warner's cable companies and the broadband access that comes with them. Why? It's simple. Tom Sawyer needn't pay painters when painters pay to work for him.By Timothy J. Mullaney, Tim_mullaney@ebiz.Businessweek.comReturn to top


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