AS PREDICTED, AOL7 FAILED – FEBRUARY 2004
It came as no surprise to me that the AOL/7 venture failed.
From the very first day, two years ago, I questioned the business model. With powerful partners such as AOL, AAPT and Seven, this should have been an ideal partnership to venture into the new media world. With strong interactive services experience from AOL, video content from Seven and a national telco, AAPT, to distribute it all – what a great opportunity!
I was therefore flabbergasted at the time of the launch, when I heard from its than new CEO, Amanda Lacaze, that they had no interest whatsoever in venturing into broadband. They thought that they were ideally positioned to deliver narrowband Internet services (including content) to the family market.
I indicated at the time that the company would only get one go at the concept, as it would be difficult to turn such large corporate shareholders around if, over time, it became clear that the road the venture was taking was the wrong one.
By that time it had already become very clear to me that portal services were of little interest to Internet users, including families – and they certainly would not pay any premium for them. This made the AOL/7 costing model, in my view, very shaky.
A year later the company figured out that the model indeed wasn’t working and it began to introduce a broadband service. Obviously they didn’t succeed. As I had foreshadowed a year earlier, it would be difficult to get all three shareholders to walk together in a totally new direction. They all have their own agendas and they would be reluctant to keep on changing directions.
The argument now – that the market has changed and that bundling is the way to go – is lot of rubbish. The company would have ideal bundling opportunities with, at least, AAPT and Seven.
What a pity, and what a missed opportunity.
In the end it was only the subscriber numbers that counted, and Primus got 90,0000 of them for the bargain price of $23 million.
AAPT also belatedly perceived that it would have to take its own initiatives in this market. Optus cleverly acquired 600,000 narrowband Internet users over that same period of time, and they are now successfully transferring these customers to broadband.
AAPT has hardly anything to convert and, furthermore, they are lagging behind in the broadband market. They will have to start from scratch in a market where dial-up Internet is a more or less saturated market.
Paul Budde
See also:
Australia – ISP Market – Statistical Overview
Seven Network Limited
AAPT – Company Analyses
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