AOL's Ad-based Business Model



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Code :BSM0058C

Year :
2006

Industry : Internet and e-commerce

Region : US

Teaching Note:Available

Structured Assignment :Not Available

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Abstract: 'You've got mail!' The celebrated jingle of the internet users of the 90s was the salutation which users got when signing onto their America Online (AOL) account. The caption was so popular that a movie with the same title was released during the 90s. America Online, the largest Internet Service Provider (ISP) in US in 2006, offered dial-up and broadband internet access and a host of online services through its web portal. It was one of the most renowned brands of the 90s as it gave Americans their first taste of the internet, e-mail, instant messaging and many more online features.

But things began to change for AOL in the next decade. The turn of the 21st century saw the merger of the internet with various domains and created a demand for high speed internet connections. AOL, which could offer only a slow dial-up internet access, was not able to fulfill the demands of the consumers. It was also bombarded with heavy competition in the field leading to a gradual decline of the AOL subscriber base.

In order to compensate the declining revenue from the internet service subscribers, AOL adopted an advertisement-based (ad-based) revenue model and offered the AOL Content free to general web users. Though this increased the advertisement revenues of AOL, it did not stop the decline of its subscriber base. However, this was not good news for AOL as AOL's subscribers accounted for 36% of the unique visitors to its network of websites and generated 80% of the page views. To overcome this, AOL made available its software, e-mail and security products free to all web users and decided to concentrate on broadband rather than on dial-up.

The case details the Internet access industry, the online advertising industry and also briefs the prominent trends of the internet users. It also details the various strategies adopted by AOL, the consumer perception of AOL and the challenges faced by AOL in reviving itself.

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Pedagogical Objectives:

  • To Evaluate AOL's new business model
  • To discuss the position of AOL-Dial Up, AOL Broadband and aol.com.

    Keywords : Internet Service Provider (ISP); America Online (AOL); Time Warner; Online Advertising; Competitive Strategies Case Study; Google; Yahoo; Online trends; Dial-up; Broadband; Cable; Consumer Survey; Time Warner; DSL; Earthlink; Comcast; Unique Visitors

    Contents :
    Internet Access Market of US
    America Online
    Strategic Changes


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