America Online Acct Analysis

Question 1: Prior to 1995, why was America Online (AOL) so successful in the commercial online industry relative to its competitors CompuServe and Prodigy?

* America Online was more successful due to the pricing rate structure. The rate structure that AOL offers is relatively easier for customers to understand and anticipate. It offers cheaper standard pricing. America Online charged the customers a monthly fee of $9.95 for access to all of its services for up to five hours each month with each additional hour charged at $2.95 and no additional downloading fees. Comparatively, both competitors CompuServe and Prodigy offered the same standard pricing as America Online but they charged additional fees for premium services and downloading. AOL’s pricing method representing the simplest of the top three competitors. AOL also developed Apple and Windows-based solutions to enable it to reach additional consumers.

* Prior to 1995, the threat of substitute products was relatively low. AOL analyzed the needs and desires of its customers and continually developed new service offerings and technologies to attract all types of customers. AOL also pursued other potential revenue-generating activities (e.g., advertising, commissions) that were connected with its main business to generate further growth.

Question 2: As of 1995, what are the key changes taking place in the commercial online industry? How are they likely to affect AOL’s future prospects?

* The key changes account to the newly entry of new competitors like Microsoft Network (MSN) provided even more competition to the original oligopoly of three. MSN had a different approach to presenting Internet content to subscribers. They also gave content providers a larger portion of subscriber revenues and more choice in the creation of their product offerings. 

* These key changes threatened the future prospects of AOL as it brings greater potential shifts in marketing efforts to content providers. The...