AOL Rides the Bucking Internet Bronco
It's time to cut America Online some slack. Sure they were greedy when they sent out millions of "free" software disks. Sure they have probably ruined business deals that required access at a critical time. And sure they have alienated consumers who have become addicted to chat rooms and spend endless hours online.
But Dulles, Va.-based America Online's recent access snafus should serve as a reality check for dreamy-eyed, would-be entrepreneurs counting on making a quick buck off Internet hype.
The Internet is a real business and this is the real world.
AOL and others, such as PSINet Inc., CyberCash and UUNet Technologies Inc., are on the front lines of the Internet industry. They are still molding successful business models - the Holy Grail of the Internet. "There's no business model yet," people say confidently.
That's true. Everyone's winging it now.
But someday there will be successful models, thanks to companies that screwed up and lost money in the late '90s and then figured it out for 2000 and beyond.
We should thank AOL for testing the bandwidth waters and discovering, amazingly, that 8 million people actually want its service.
As AOL's senior vice president Mark Walsh said about the Internet industry last week, "Nobody knows what's going on. Anybody who says they do is lying or deluded. We're riding a bucking bronco."
It's still too early to tell if AOL will fall flat on its face or successfully ride out the hard times.
Regardless, AOL's experience should be a wake-up call for those who still see the Internet as an aberration, including Luddite fear-mongers who say it will destroy interpersonal communication. We are in the early stages of a revolution.
The lesson here is that the Internet is a real business with winners and losers. The most successful Internet service providers still are not profitable.
While much has been made of fluctuating stock prices, technology failures and competitive pricing, these are all part of businesses as diverse as banks and cars. The Internet is not a fad.
AOL has become the poster child for the problems of the Internet industry. It has been a pioneer in a yet untested market. It made people think of the Internet as a utility. Consumers get angry when their phones don't work, but we hardly ever see people suing their phone company.
Internet users as a group love to complain. What they whine most about, besides Bill Gates taking over the world, is that AOL is not "real" Internet. Well, the service is real enough for 37 state attorneys general and 8 million customers to take notice.
So far, the AOL experience has shown that the consumer market, to a large extent, is a nightmare. PSINet, which is way off its projected plan to be profitable, jettisoned its consumer focus after saying for years it could do both.
The latest AOL rumblings are that many customers won't get the refunds the company has promised in full-page advertisements. Some aren't eligible and others simply don't want to spend hours on the phone to chase a few dollars.
While consumers are losing here, businesspeople taking notes on the AOL case will profit in the end.
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