Can AOL Survive?

John C Dvorak certainly does not think so….

Here is the problem, from the beginning. This kind of online information business has never made money. The Source (1980s) went out of business and was absorbed by CompuServe. CompuServe was always sketchy and was eventually absorbed by AOL. Ziff-Davis developed an online service that lost money and was sold to AT&T, which folded it. Prodigy always struggled. Apple tried an online service and folded it fast. Microsoft, thinking it should be in the business because AOL is so big, has lost money year after year with MSN. Hello? Earth to the business press, come in! This business is a loser. It has never made money, and only the dot-com house-of-mirrors anomaly made things appear otherwise. And this became truer for AOL once the company switched from metered rates to a flat fee.

Let’s compare AOL or MSN or any other closed system to the standard ISP model. An ISP connects the user to the Internet, period. There may be an informational Web site and some storage for users’ small Web sites, but an ISP doesn’t have server farms redistributing and repackaging what is already free on the Internet. That’s wheel-spinning. An ISP does not have massive chat rooms and large public forums that tie up the basic service, either. Pure ISPs make some money, but they are hardly setting the world on fire. How can an information utility such as AOL make money with all the additional overhead? It can’t and probably never could.

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