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America online Case Study

Autor:   •  March 8, 2011  •  Case Study  •  609 Words (3 Pages)  •  5,042 Views

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Week 4 Additional Case Study: America Online, Inc.

Question 1: Prior to 1995, why was America Online (AOL) so successful in the commercial online industry relative to its competitiors CompuServe and Prodigy?

Answer:

America Online was more successful due to the pricing rate structure. The rate structure that AOL offers is relatively easier to understand and anticipate. It offers cheaper standard pricing. America Online charged the customers a monthly fee of $9.95 for access to all of its services for up to five hours each month with each additional hour charged at $2.95 and no additional downloading fees. Comparatively, both competitors CompuServe and Prodigy offered the same standard pricing as America Online but they charged additional fees for premium services and downloading.

Question 2: As of 1995, what are the key changes taking place in the commercial online industry? How are they likely to affect AOL's future prospects?

The key changes that are taking place are the emergence of Internet; World Wide Web and the entrance of Microsoft Network into the commercial online industry. These key changes threatened the future prospects of AOL.

The Internet World Wide Web limited the role of online consumer services companies, including industry leaders such as AOL, CompuServe and Prodigy, as middlemen between content providers and customers. On the Internet, every person that has a computer was his/her own publisher.

Microsoft acted as a bookstore which means one in which every content provider was his/her own publisher. It kept only 30 percent of the commission fees and passed the rest of commission to the content providers as well as offering them greater control over their own products. AOL only offers 20 percent of commission fees to the content providers. Therefore, the arrival of Microsoft and the emergence of the Internet will potentially expect to cause AOL's market share and customer base to go down.

Question 3: Was AOL's policy to capitalize subscriber acquisition costs justified

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