American online

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

There are two main reasons:

⑴ The products offered by the AOL had a broad range of features and met the varied needs of its four million members. The range of features offered by

America Online included the following: Online Community, Computing, Education and References, News and Personal Finance, Travel and Shopping, Entertainment and Children’s Programming.

⑵ The price. A monthly fee of $9.95 provided access to all of America Online’s services for up to five hours each month. Each additional hour was $2.95 and no additional downloading fees were charged. CompuServe and Prodigy offered the same standard pricing but charged additional fees for premium services and downloading. The additional fees charged by AOL’s competitors made it more difficult for their customers to anticipate their monthly spending.

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?

In 1995, the Internet World Wide Web was found and Microsoft Network entered the Commercial online industry. Microsoft acted as a bookstore, one in which every author was his/her own publisher. They provided alternative distribution channels, so the potentially higher revenues of AOL were controlled. Many content providers were beginning to take advantage of these alternative distribution channels. With the migration of proprietary services and content to Web sites, the unique offerings of the big three services were declining.

3. Was AOL’s policy to capitalize subscriber acquisition costs justified prior to 1995?

I think AOL’s policy