http://www.wirednews.com/news/business/0,1367,42749,00.html
AOL's March to Get Europe Online
by Matt Hilburn
WIRED NEWS
2:00 a.m. Apr. 3, 2001 PDT
MADRID -- America Online's plans to greatly expand its activities in Europe
took another step forward last week with the announcement of a partnership
with Spain's leading bank, Banco Santander Central Hispano.
The deal will provide 250,000 Internet machines to bank customers by the end
of the year.
These Internet-only machines -- computer-like appliances that allow the user
to surf the Web, send e-mail and do other similar tasks --will operate in an
AOL-like environment. In France, where the company already has a foothold,
it announced a partnership with NC Numericable to provide AOL over
high-speed cable.
These moves are a part of a strategy announced at the beginning of March to
increase AOL's international
revenues from 17 percent to 50 percent of its total over the next 10 years,
with Europe being a prime target.
AOL currently has a relatively small footprint of roughly 4 million users in
Europe, but the recent moves could
mean serious competition for European ISPs such as Germany's T-Online,
France's Wanadoo and Spain's Terra
Lycos, none of which are profitable.
"They have something to fear because AOL is a company that has created a
category on its own in terms of
Internet and media with tremendous assets and distributions." said Michael
Steib, an analyst at Morgan
Stanley Dean Witter. "It's a company that must never be underestimated."
Neither Wanadoo nor T-Online returned calls to offer their point of view of
what seems certain to be
increased competition, but they did reiterate their place as leaders in
their respective markets via e-mail. A
Terra Lycos spokesman said that the company welcomes the competition.
Wanadoo, which operates in several European countries, reported losses of
102 million euros last year; while
T-Online, Europe's leader with operations in France, Austria, Spain,
Portugal and Switzerland, bled to the
tune of 122 million euros.
While Wanadoo and T-Online are winning the battles in their respective
countries, they lack brand
consistency across the continent, thus limiting the ability to leverage
their names. T-Online, for example,
goes by Ya.com in Spain and Club Internet in France.
"They (AOL) were some of the early people to approach Europe as a whole,"
Steib said. "They were some of
the early movers."
Andrei Bogolubov, the chief communications officer for AOL Europe,
elaborated on the importance of a
continental approach. "When they want to move into another country, they
have to buy a different brand,"
he said. "That makes it hard to offer a pan-European advertising or
e-commerce deal to partners, and it's a
trickier job to integrate the technological platforms."
In terms of scalability, the European ISPs are just not in the same league.
Wanadoo hopes to attract 10
million subscribers by the end of 2003, roughly a third of what AOL already
has worldwide. T-Online has
roughly eight million users.
The advantage of size gives AOL room to do what others can't. In France,
where there is no flat-rate dialup
access, for example, AOL is able to offer unlimited access due to its sheer
size -- albeit to a limited number
of people.
Steib thinks that from a content standpoint, European ISPs will have a hard
time competing with AOL. As an
example, he said that T-Online gets roughly 88 percent of its revenues from
access charges. He thinks that
one of the biggest challenges facing European ISPs will be investing in
content that can be leveraged to
make money.
"A lot of the European ISPs are weaker on the content side, especially the
ones that don't have
subscriptions," he said. "Personalization, for example, is something that
AOL rolled out a long time ago, but
you still can't set up a 'my' T-Online."
One positive development for the European ISPs has been moving to a
subscription policy as opposed to the
"free" model many of them adopted when the Internet got started in Europe.
As most of the main players in
Europe are affiliated with their telecom big brothers, they derived income
primarily from charges for
connection time, still measured by the minute in all but England.
The continuing move to a subscription approach is giving them a deeper
understanding of their customers as
opposed to the free ISP model in which customers were anonymous. But the
importance of knowing the
customer was a lesson AOL learned early on.
"Essentially we have these unique subscriber relationships," Bogolubov said.
"These are people who share
credit card information, and when you compare us to T-Online, we have
something like seven or eight times
the usage, and that creates a powerful platform from which to create
multiple revenue streams."
AOL, despite what seem like some obvious long-term advantages, is not taking
the competition lightly.
"These are very serious players, and we take them seriously," Bogolubov
said. "But when you think about
what AOL can amortize against 31 million members ... that's just one way to
make the comparison, but I
think it's one that really shows how things are."
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