David Cassel (destiny@crl.com)
Tue, 12 Nov 1996 15:05:15 -0800 (PST)
" T h e C o m p a n y I s T a n k i n g "
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Hundreds of layoffs.
That's the word coming from inside AOL today: the company has laid off
hundreds of its workers. The mood is one of pessimism. An AOL source
said, "The company is tanking." They gave the number of laid-off workers
as 450; another source put it closer to 300.
Financial journalists are taking a hard look at AOL's finances. Business
Week recently reported that AOL has consistently lost 25% of their
members--an annualized "churn" rate of 100%. In an October 14 chart,
Business Week estimated the cost-per-subscriber would stop increasing in
the September quarter. They were wrong--it rose to $350 per member,
according to last week's quarterly report--up from $268 just 3 months
before.
Investors are becoming cynical, according to Business Week. "News of
Pittman's arrival and the restructuring plan impressed Wall Street, but
not much... 'We are past the point where investors will take them on
faith,' warns Ulric Weil, an analyst with Friedman, Billings, Ramsey &
Co." The latest issue features a graph titled "America Lagline", tracing
the stock's 65% drop since May. 'If they don't come up with these
alternative sources of revenue, they're in trouble," a Jupiter
Communications analyst warned them.
Business Week notes that non-subscriber revenues were just 9% of the
company's profits in June. That was when AOL announced they were going to
greatly expand the percentage of company income derived from advertising.
In the last three months, it has increased--to 11.1%. "If those new
sources of revenue don't materialize," Business Week wrote in October,
"AOL does not have many other tricks."
The Washington Post reported that revenue increased 76.8 percent from the
year before. But the previous quarter, they increased 120.2 percent from
the year before. In addition, the Post writes that "For every five people
who tried out the service during the quarter, the company increased its
total domestic membership by one." Which, in a way, is good news:
"During the preceding quarter it took almost seven trial members to
increase the total by one." (Business Week reports that AOL has started
giving customer service representatives a bonus for each customer they
talk out of cancelling.)
What's behind the December plan to double rates by default? "I think it
was a revenue-driven decision," Emily Green of Forrester Research told
C|Net. (They also noted that unlimited access plans apply only in the U.S.)
More details on the layoffs appear tomorrow in Newsday.
(http://www.newsday.com) But after receiving news about discontent among
AOL's remote staffers, TipWorld's gossip columnist wrote "AOL to Community
Leaders: Drop Dead". Don Crabb reported that many Community Leaders were
fired after complaining about the full-time staffers who manage them--and
hinted that a "gag order" was put in place to keep internal friction from
surfacing in the media. He urged the staffers to quit.
THE LAST LAUGH
Source inside AOL say the PR department's Mr. Zielinski is none-too-pleased
about the "America Offline" homepage at http://www.kelani.com/aol -- "but
he agreed that a lot of the stuff was true."
Destiny
More Information - http://www.wco.com/~destiny/time.htm
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