AOLís Ad Revenues: A New Business Model


Code :BSM0021

Year :

Industry : Internet and e-commerce

Region : USA

Teaching Note:Not Available

Structured Assignment :Not Available

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AOL: The Business Model Launched in 1985, AOL was the first consumer online service company. It was the first to introduce the instantmessaging service, Parental Controls and an "anywhere" e-mail system. The novel features of the graphical user interface used in AOL appealed to most of the subscribers. Consequently, AOL became one of the leading online service providers in the industry. During the 1990s, AOL entered into mergers with several software companies to strengthen its position in the industry. AOL also developed an in-house content development team along with an advertising sales network to capitalise on the business of producing content and by the mid-1999, became the top American ISP with a customer base of 17 million...

The Industry Landscape Yahoo! was formed by David Filo and Jerry Yang in April 1994 as a Web-directory to help users navigate the Web. Apart fromproviding userswith news, financial information and streamingmedia content,Yahoo! also offered personalised Web pages, e-mail, chat rooms, and message boards to the registered users. The main source of revenue had been advertisements,which appeared in the formof premiumlisting, and enabled URLs of advertisers to appear at the top of any searches done using a keyword. Yahoo! also earnedmoney byway of Pay-Per-Click model of pricing from its shopping website ĖYahoo! Shopping.Yahoo! gradually upgraded fromthe previous standard flat rates charged for advertising to the performance-based deals, where advertisers paid only when a visitor clicked on an ad or signed up for a service...

Changing Ad Revenue Model of AOL In 2002, AOL formed an alliance with Google so that its users could use the Google technology to search theWeb. However, AOL's revenues could not increase even after this association and it continued to have a downward plunge during 2003. The decline in the ad revenue was attributed to the overpriced advertising rates and the inflexibility in the negotiation skills ofAOL's salesmen.AOLwas also criticised for poor customer service, complex paperwork, long response time to ad agency requests for proposals and inventory as well as technical limitations...

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