America online Strategy Analysis

Case: America Online Inc.,

Topic: Strategy Analysis

Prior to 1995, AOL was so successful in the commercial online industry relative to its competitors CompuServe and Prodigy primarily because of its pricing rate structure which was the easiest for customers to understand and plan for ahead of time. CompuServe and Prodigy offered the same pricing as AOL for its standard service, but, charged additional fees for premium services and downloading which made it more difficult for customers to anticipate their monthly spending.

The key changes taking changes taking place in the online industry in 1995 are the introduction of the Microsoft network and the coming of use of the Internet World Wide Web which offered alternative channels to content providers that provided more control over their offerings and potentially higher revenues. Microsoft Network took only a 30% commission fee (versus 80% taken by AOL from its content providers’ revenues) from its content providers and offered providers the option of choosing any format and font to display their content (versus the standard screen displays offered by AOL and its rivals). Also, the per-hour pricing policy offered by Microsoft was superior to AOL’s. With the development underway of a way to provide on-line currency collection, the World Wide Web offered huge incentives for providers to start publishing material on the internet by their own means without having to go through a middle-man such as an online provider. Both of these offerings