[MUD-Dev] Re: UBE/high: RE: [Mud-Dev] Re: Affordances and social method

[Dr. Cat]

Raph Koster wrote:
> Has it? My understanding was that AOL hasn't really been raking in
> profits. (Not doubting its success as a business, just curious about its
> profitability).

AOL is an interesting business.  For many years they reported profits, 
using some accounting techniques that are misleading but legal (deferring 
certain costs over a longer period than is justifiable, etc.)  When they 
shifted to the flat monthly pricing, they also accelerated the writeoff 
of all those costs and did it right on the spot, stating that they'd 
abandon those accounting practices in future, too.  The result was a 
one-time loss of hundreds of millions of dollars.  The savvier analysts 
observed that this was enough to wipe out all the years of "profits" made 
since the company was started.  But most people didn't pay too much 
attention to that little detail.  And it certainly looks better to have 
"a profit every quarter and then a loss for just one quarter" to most 
people, rather than what it would have looked like if the costs were 
spread out more evenly over time.

If you look at it cynically, as a scam to inflate the stock, clearly 
they've made some big money there.  The market value of the company is 
something like $18 billion now, I believe.  And they've bought various 
smaller companies over the years with stock swaps due to that kind of 
high valuation.  But from a more practical standpoint, ethical or 
unethical, what an access provider really needs to have value and become 
profitable is critical mass, and AOL has it.  Most of the $20 a month 
ISPs out there are losing money, and hoping they can keep adding new 
customers fast enough to stay afloat and eventually sell the company off 
or go public, or in the case of the really big ones *maybe* achieve 
enough size to be profitable.  AOL, at over 10 million people now, is 
signing deals like the one they made with a long distance company that 
paid them $100 million in cash for the opportunity to market their 9 
cents a minute long distance service to AOL members.

The attention of a large audience is worth serious cash.  The television 
and radio industries have known this for years.  TV advertising is a $30 
billion a year industry now.  Online stuff is more addictive than TV in a 
lot of ways, and is starting to eat into its market share noticably.  AOL 
has more of that "attention share" to sell right now than anyone else in 
the world.

So yeah, they're making money.  But not nearly as much as they're going 
to make in the future, I'd wager.  Still, I wouldn't complain too hard 
about the money they've made to date, if I had some of those AOL stock 
options like a friend of mine does.  I think his quarterly stock options 
are worth more than his salary is!

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