America online Inc (aol) History
.Prior to 1995, why was America Online (AOL) so successful in the commercial online industry relative to its competitors CompuServe and Prodigy?
AOLs rate structure was the easiest for consumers to understand and anticipate compared to its competitors. Also no additional downloading fees were charged. The additional fees charged by AOLs competitors made it more difficult for their customers to anticipate their monthly spending.
Moreover, AOL uniquely positioned itself to lead the development of the new interactive services industry. Toward this end, AOL had signed new strategic partnerships with other large companies.
In addition to those, AOL not only had high quality unique content, aggressive marketing, but also had large subscription base and friendly interface.
2.As of 1995, what are the key changes taking place in the commercial online industry? How are they likely to affect AOLs future prospects?
First, there are new entrants like Microsoft and Netscape into the market, and that stands for a new model of economy. The advent of Internet World Wide Web and the entrance of Microsoft Network enabled content providers to have alternative distribution channels that offered greater control over their products and potentially higher revenue. Content provides began to take advantage of these alternative distribution channels and the unique offerings AOL were declining.
3.Was AOLs policy to capitalize subscriber acquisition costs justified prior to 1995?
The amortized subscriber acquisition costs were amortized over 12-18 months before July 1 1995 while be amortized over 24 months after July 1 1995, therefore, capitalize subscriber acquisition costs may not be a right thing to do as for AOLs competitor CompuServe did not do so. Given that the uncertainty surrounding AOLs