America Online - better known as AOL - is the second largest service provider in the UK, according to its own figures of 150,000 subscribers. This puts it around 300,000 behind the much maligned, yet very popular, CompuServe - just over 14 months since AOL's January 1996 launch.
Being the world's largest online player means it's unlikely to take this second place lightly. In the US, it has six million users and prefers talking about having just passed the half million mark in Europe as a whole.
But it's not all smooth sailing for AOL. Last year it suffered system failures that have led to compensation claims from subscribers, which the company has responded to with a pool of $23 million for compensation. In February, two US law firms filed a suit against AOL on behalf of its shareholders, claiming that AOL officers, directors and outside accountants violated federal security laws by selling stock when the share price was at peak value.
Despite such embarrassments, the UK operation seems to be quietly getting on with the business - providing faster access at 33Kbps and signing new content deals, including the Economist Intelligence Unit and an online sales offering with Interflora.
As an online service provider, AOL offers access to a range of content that cannot be found on the Web. This is largely a historical feature because it began life as a closed service with no link to the Internet. While some question the value of such closed content, AOL emphasises the benefits of exclusive live interviews, chat areas for AOL members, and around a dozen themed departments sometimes referred to as channels. The other unique selling point is that if you don't use the service very much it works out a few pounds a month cheaper than most ISPs. Users currently pay #5.95 for five hours a month and #1.85 for each additional hour. Clearly, heavy users of the Internet with little interest in the exclusive content would be unlikely to want such a service.
In the US, the service has been buoyed up by announcements that it is to carry advertising in its chat rooms, which one analyst predicts will generate between $15 million and $25 million this year. AOL estimates that users spend more than 20 per cent of their time online in chat areas.
US-based AOL Enterprise is also beefing up the business package with a series of premium-priced content channels for vertical markets. These include: a medical channel providing doctors with descriptions of drugs, drug ordering and medical image exchange; and a business channel (June launch) offering information from MAID's Profound and IBM's InfoMarket services. These channels, along with a new education service, are expected to cost $19.95 a month for unlimited access.
AOL's UK Managing Director is American-born Johnathan Bulkeley. He joined the company in 1993 after eight years at Time Inc, where he spent his last three years as Director of Marketing and Development at Money Magazine. Bulkeley is responsible for the development, creation and marketing of AOL's service in the UK. AOL in Europe is a joint venture between AOL and German publisher Bertelsmann. Bulkeley reports to Bernd Schiphorst, President and CEO of the joint venture, who is based in Hamburg.
Describe your setup here in Fulham Broadway.
"We have about 40 people, half of whom work in editorial services. Customer support is in Ireland, where about 90 people are based."
AOL makes a lot of its content and the value of it to new subscribers. What is it you look for and what would you like to add?
"We look for people who are passionate about what they are offering. Nickelodeon (broadcasting) and Time Out (London guide) are good examples. But the most popular content is actually member chat areas."
Describe the typical subscriber.
"He's a well-off 40-year-old, lives in the South East and goes on long-haul holidays. Women are on the increase though and I predict there will be more women than men on AOL by the year 2000. It may sound sexist, but it's because women 'communicate' (smiles knowingly) more than men. It's also because older women are more prepared to try something new than older men."
Will this affect your content?
"Yes, but you can't lead it too much. If you look at the US content it has already happened. There are style, lifestyle and health channels that more closely reflect the interests of women."
AOL is compensating subscribers in the US because of the periods when the service was down due to technical error. Why not have an upfront compensation policy for subscribers?
"Problems will always occur. We deal with 10 million sessions (logons) and 100 million messages a day. We're scaling the system to deal with that, but there is no intention of promising any level of service. Outages will occur. This is like TV in the 1950s. We have allocated $24 million for refunds in the US."
Would you say you offer a service for business?
"We cater for consumers and business. AOL is useful for travelling businessmen. Then there is the backup of content like the Economist Intelligence Unit for stock quotes and Dun and Bradstreet for company information."
What do you think of competitors like MSN and CompuServe?
"MSN is black (referring to the home page design) and slow. It focuses on entertainment, not community as we do. I'm not sure how that appeals to business. They're also pushing the technology too far. CompuServe, I would say, is weaker on infrastructure, design and ease-of-use. Their email is pretty good, but they don't have a 'buddy list' (this allows an AOL user to see which friends or associates are online at any time)."
There's a lot of talk at the moment of 'push' technology delivering information straight to the desktop. Where does AOL stand on push?
"Think of us as a media company. As such, we are looking into push technology as a means of reaching our subscribers."
What do you think of the current battle for subscribers in the UK?
"Virgin can't continue to give so much away (currently three months free use), neither can Demon. We don't have to be the cheapest or offer unlimited access. With low prices you can't reinvest, and scaling to go above 100,000 is no picnic."
Do you feel your revenue model is on track?
"AOL has just signed a $100 million deal with Telsave in the US, so, yes I do believe it works. It's been slow here with an industry revenue all round of about u1 million last year and most of that coming from computer hardware and software companies. But it will improve."
Where do you expect to be in a year's time?
"Things will continue to grow at this rate, which means we'll have about double the number of subscribers."
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