AOL gives up UK race
Published: 22 Jun 2000 15:04 BST
America Online (AOL), once the top Internet service provider in the UK, has effectively given up the race for the number one spot here with the decision to stop quoting separate subscription numbers across its European markets.
US-based AOL last week announced impressive subscriber growth for its core brand; meanwhile AOL Europe, a joint venture of America Online and Germany's Bertelsmann, has quietly stopped quoting subscription figures for AOL UK, its wholly-owned subsidiary.
Industry analysts say there's a simple reason for this: AOL UK's growth is in a mess. Two sources close to AOL UK even described the subscription figures as "collapsing".
Is the British subsidiary of the world's largest Internet service provider in trouble? The signs don't look good: AOL UK's growth has been hit hard first by the boom in "free" ISPs, spearheaded by Freeserve, and more recently by a spate of cheap-and-cheerful unmetered services, which charge a flat rate for unlimited surfing. (See ZDNet UK's Unmetered Access Guide.)
And as each challenge has manifested itself, AOL UK has grown quieter and quieter about its subscription numbers. In February the service began lumping together the figures for its AOL-branded and CompuServe-branded services; but even those two combined with the Netscape Online "free" ISP still left Freeserve in the number one spot.
Now AOL, once the UK's largest service provider, has seemingly given up the challenge for the top spot in this market: the only UK figure it will give is for Netscape Online, which rose from 400,000 subscribers to "over 500,000" in the two months ending 31 March.
By comparison, Freeserve in early February had 1.56 million users.
The figures AOL does release for Europe: as of 31 March it had 3.5 million users for the AOL and CompuServe services across Europe, including more than one million for the AOL brand in Germany.
In February, AOL reported it and CompuServe combined had 1.2 million users, 800,000 of which were registered with AOL. That gave AOL 200,000 new users since November.
AOL spins the vanishing UK figures as getting out of "the numbers game". Industry observers, however, say AOL is facing a crisis in the UK market, where it has been slow in adapting to rapidly changing conditions.
"They say good things, and announce services, but they're following the market rather than leading it," said Adam Daum, research director with Gartner Group. "If they've started reporting their UK numbers bundled in with the total European numbers, that's a warning sign. If I were an AOL partner I'd be asking lots of questions about this."
Daum said AOL has built its success until recently on heavy marketing of its existing subscription-based business model. "But I wouldn't be surprised if, with the recent announcements of flat rate pricing, they've suffered badly," he said.
Ironically, the recently-launched unmetered services, with their no-frills approach and technical problems, could open up a new market for AOL, simply because of its proven reliability and consumer-friendliness.
But though it recently announced an unmetered offering in Germany, AOL doesn't seem in any hurry to get in on the UK opportunity. "They ought to come out with a flat rate service... that'd be a really strong message," Daum said. "I don't know what they're playing at."
About a year ago America Online would pay you good dosh for moderating a forum, or providing some kind of reader 'focal point'. But Guy Kewney reckons you wouldn't try this today; AOL would tell you how much YOU would have to pay THEM. Go to AnchorDesk UK for the news comment.
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