Aol Case Study

I) Reasons for the success of America Online (AOL) in the commercial online industry relative to its competitors CompuServe and Prodigy:

Firstly, AOL offers a wide range of services, including community, computing, education and reference, news and personal finance, travel and shopping, entertainment and children's programming. The variety in services help AOL attracting more customers and targeting to more market segment, including different types of customers from young to old people, children, families etc. Comparing to other company in the industry, AOL offers cheaper service fees with more content in some special and popular websites (these websites generated more than 80 percent revenue for the AOL). In additional, AOL services are compatible with different computer systems such as Commodore, Apple, Windows and palmtop computers. It is very important because AOL can support customers who are using different system. People can subscribe to be AOL's membership no matter what computers they are using. It is even more important when it comes to business segment, when the computer system in each company is big and different comparing to others. Another reason for the success of AOL is the main focus on marketing. The cost of attracting new subscribers became the biggest expenditure if the company. The marketing strategy varies including independent and co-marketing efforts.

II) Key changes in the commercial online industry in 1995:

The online consumer services industry was expected to grow by 30 percent in 1995. Eleven million customers subscribed to commercial online services worldwide and this number was also expected to explode in the next five years. Although AOL and other industry leaders including CompuServe and Prodigy was still holding a large portion of market, there is threats due to the rapid growth of customer needs and technology. One of the main potential threats came from Microsoft with its network called MSN. MSN offers more flexible service to content providers. The content providers had more choices and greater control over their own products and services. In addition, with the migration of proprietary services and content to Websites, the unique offerings of industry leaders like AOL were declining.

These changes will have significant effect AOL's future prospect. The company was facing more challenge from new competitors such as Microsoft. The growth of technology also required AOL to focus more on improving and expanding their service range to maintain the market position. Although it is expected that AOL will gain more subscribers in following years due to the increasing popularity of online services, its offerings were predicted to be declining and AOL might face its downhill in next few years.