Content based business models have a number of pitfalls
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AOL is the newest mega-business to enter the content arena with ferocity. It’s understandable why a move like this could be attractive to them. Running an internet access business (especially one that’s still heavily reliant on dialup infrastructure) has a great number of expenses. Access customers need a lot of support (both technical and for billing) and fixed telecom costs are high.
To a company like AOL, they may see the content business (especially as its’ represented by Google) to be a highly lucrative arena. Indeed it is, but there’s a number of potential troubles for any company attempting to live off such a business model, not the least of which is, the volatility of pricing in advertising, and the nascient nature of the market. Google, MSN, and Yahoo understand the troubles, in the form of click-fraud, and have formed an alliance to combat a growing problem that threatens to destroy the entire system.
AOL is saving money as part of the plan, laying off 5,000 workers. But giving away free storage space and free email is hardly earth shattering news, or particularly profitable. How much of a boost exactly these free services will be to AOL’s bottom line remains to be seen.
If nothing else, the plan is grand in its’ scope and new in its’ vision. AOL, as a giant and expensive dialup provider represents the old internet, which is decaying daily. The “New AOL” or better yet, re-invented AOL promises to embrace all things “Web 2.0″ as part of their overall strategy? Will it work? I tend to doubt it. But one thing I have to admit to be happy about: the fact that no more trees need die in the making of the obnoxious AOL free disk offers. At least we can finally see an end to that era, once and for all.
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