Nicholas Carlson points out that the overwhelming portion of AOL’s profits come from selling people internet access they don’t need.
In his big New Yorker profile on AOL this week, Ken Auletta explained that 80% of the company's profits STILL come from AOL's subscription business.
What's troubling about AOL's subscription business is who the subscribers are and why they may be sticking around—in Auletta's words, "older people who have cable or DSL service but don't realize that they need not pay an additional $25 a month to get online and check their email."
A former AOL exec explains that this is AOL's "dirty little secret" – "that 75% of the people who subscribe to AOL's dial-up service don't need it."
AOL's subscriber revenues during Q3 2010 were $244 million on 4 million customers.
Unless AOL can figure out a way to give subscribers something that they do need to pay for (and then keep paying), this will eventually come to an end. AOL is down from 35 million subscribers in 2002.
But if a big portion of AOL's subscribers really are only paying the company because they think they have to to keep using their free email, you have to agree—this is not ending fast enough.
This is shocking and ordinarily we’d get our moral outrage motors started. Or, at the very least, explain why this could make a very good case for shorting AOL.
But this isn’t an ordinary day. I’m feeling diabolical. So, instead of being outraged, I’m inspired. Inspired to create the greatest internet scam ever.
Here’s what I suggest. Start a company that will sell people access to Facebook. Now, everyone already has free access to Facebook. So you are essentially selling them a worthless product.
But many people do not know that something as important as Facebook is completely free. They’ve never signed on to Facebook. They aren’t even sure how to do it. The Facebook Access Program would—for a fee—show them how.
Here’s the ad copy: FULL ACCESS to FACEBOOK. Just $15.95 a month!
Now we could actually create a sliver of value by creating an instructional website that would teach people how to make a Facebook profile, how to search for friends, how to adjust privacy settings, and how to succeed at Farmville.
Would people really pay a monthly fee for access to Facebook? I bet a lot of people would. After all, people pay for things like credit reports and AOL email. And Facebook is much cooler than that.
Well, that’s the idea. The ultimate internet scam. I’m diabolical enough to think about it. But not enough to actually do it. I leave that part to you.
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