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AOL Is Still the Weirdest Successful Tech Company in America
- nathan_long 13y ago>> [dialup subscriptions] plus revenue associated with services like AIM, accounts for more than 100 percent of the company's profit More than 100 percent of its profits? Can someone explain that to me?
- melvinmt 13y agoWell, any revenue usually accounts for more than 100% of profit.
- GotAnyMegadeth 13y agoI guess if it made losses in other areas, then added together, the total profit would be less than the revenue in "services like AIM"...
- criley 13y agoMaybe the amount of profit from those two equals say a number that is 120% of their total net profit, but losses in other divisions bring their total net profit down. Therefore, the profits of those two divisions is greater than the profit of the company?
- Waiting4Hellban 13y agoEffectively, their customers are paying to be advertised to.
- mikegreco 13y agoWhat this is saying is that subscriptions are making more money for AOL overall than the other ventures are losing, so they are making profit above and beyond other losses (as opposed to breaking them even.) It's a shorthand way for the writer to say that subscriptions are such a cash cow, it really doesn't matter what the other divisions are doing.
- joshdick 13y agoIt's because the other part of their business, media and advertising, loses money, as the article states. If you make $168M from subscriptions and lose $5M from media, then subscriptions account for about 103% of your profits (168/(168-5)).
- berberous 13y agoThe rest of the company has a negative profit (loss). For example, with made up numbers: $100mm profit from subscription division + $50mm net loss from advertising business = $50mm total profit, but 200% of that total profit comes from the subscriptions.
- dsr_ 13y agoprofits = revenue - expenses So, the revenue from their subscriptions/AIM customers is not merely the only thing which is profitable for them, but the other lines of business are all run at a loss. Fictional example: Line Revenue - Expenses = Profit dialup 1000 - 100 = 900 everything else 200 - 500 = (-300) Totals: 1200 - 600 = 600
- untog 13y agoThis is what makes stuff like closing AOL Music even sadder- AOL is in a really weird position where they're making a ton of money where they shouldn't be- they are in a prime position to do some really interesting things on the net. But they don't.
- ryguytilidie 13y agoIt's actually pretty much the main problem with capitalism. Innovation often drives prices down, and prices going down means less profit, so at a point, there is an absolute disincentive to innovate. Obviously in theory people would leave the inferior product, but that is clearly not the case in situations like this.
- dx4100 13y agoIt happens in any type of economic system, except in capitalism, it happens much slower. I'd prefer eventual stagnation with the possibility of reviving innovation to a forced stagnation by a particular economic system.
- shaddyz 13y agoI wouldn't consider capitalism an economic system. It is more of a description of the behavior of organisms. Free markets naturally produce monopolies just like humans have monopolized Earth. Once the monopoly is achieved, the motivation to innovate diminishes along with the entity's competitiveness. Eventually, someone will challenge the monopoly-holding alpha entity and the cycle continues. It happens in economies, societies, ecosystems, and any domain where evolution takes place.
- nijk 13y agoA natural system is still a system. And anyway, capitalism's reliance on enforcement of property rights isn't more natural than a communalist model where no one has property rights.
- kcorbitt 13y ago
- obituary_latte 13y agoI'm pretty sure a good chunk of their profits are coming from people who have gone years without realizing they can cancel their "AOL" and still have access to the internet via the DSL/Cable they are paying the phone/cable company for. I've seen this many, many times.
- colkassad 13y agoI don't know...this sounds apocryphal. I've seen the occasional AOL email address but I've haven't seen anyone claim they use AOL for internet in years.
- cfaftw 13y agoMy mom. She was still paying for AOL until about a year ago, despite them having broadband since 2000. She thought it was her internet. I finally convinced her to start using gmail, but I think she still pays for AOL. Also, now she thinks google is her internet.
- BrianEatWorld 13y agoMy dad as well. I have set him up accounts a couple of different times and tried forcing use by only email the gmail address. Yet every time I get an email from him, its from that flipping AOL account. Yet, I install Opera four years ago and come home to find its become his default browser and he knows the hotkeys better than I do. Go figure...
- JoeKM 13y agoMy dad still pays despite having Comcast since forever. He thinks he'll lose his email he's had forever if he cancels. I've tried many times to convince him otherwise but.. some people just don't get technology and the Internet.
- illuminate 13y agoInertia isn't luddism, necessarily. Hating change isn't hating technology, even though the end result is using older tech.
- fluidcruft 13y agoRevenue for that division/activity happens to be larger than overall company-wide profit. The author's use of "accounts for" implies some sort of causality, but I suspect literary flourish and innumeracy.
- spoiledtechie 13y agoI was just asked for an Interview by AOL for their Streaming Media business. The recruiter told me that the media business was totally profitable as I questioned AOLs future. I guess now, in hindsight, im glad they were working with tech I didn't want to put my hands into or someday, I would be looking for another job.
- arbuge 13y agoI find it hard to believe those media properties like Huffpo are losing money. I didn't read their financial statements but I wonder if it's just a financial artifact caused by deprecation/amortization. They bought Huffpo for $315m a few years ago for example... if they're amortizing that over several years, they could really be printing money but ending up with an accounting loss.
- illuminate 13y agoI'd like to think my friends realized that HuffPo was a vile pit of tabloid trash (independent of their pandery political positioning) and content farming. I WANT TO BELIEVE. Don't take this away from me!
- jcampbell1 13y agoGoodwill does not depreciate, thus your accounting explanation doesn't make sense. Huffpo cannot be that profitable because their ad inventory is total garbage. That site is probably worth less than $1 CPM. They probably make a mere million dollar per billion page views.
- andrewthornton 13y agoIf they are getting $1 CPM it would be a miracle.
- UVB-76 13y agoI guess they just have enormous expenses — tons of people on the payroll, nice offices, etc. — and don't pull in enough advertising revenue to break even. Losing money isn't hard.
- vidarh 13y agoI don't find it hard to believe: If you had a massive revenue stream coming in from a product that you know is dying, you might be happy just to milk it and close up shop when it dries up, or you might decide to throw a large chunk of your earnings from that division into trying to grow your other businesses, at the expense of profitability, in the hope of being able to make solid profits from them when you scale back on the "growth at all cost" expenditure down the line. Whether or not they'll succeed at that is another matter.
- etrautmann 13y agoThis does not consider market cap. Yes, AOL's stock price has done better, but the total revenues are a tiny fraction of Apple...
- wpietri 13y agoYes. Stock A rising more than stock B only means that the market has been more pleasantly surprised about A than B. So given that the point of the article is "AOL is doing surprisingly well thanks to low expectations", it'd be natural that the stock would gain more than companies that people expect more from. Also, I'd have a hard time calling AOL successful (which the article does). They're net profitable, but on something that's doomed. And the thing that's supposed to save them, selling ads against content, is looking pretty sickly as well. Profit is correlated with success, but they're definitely different.
- chourobin 13y agoAlso the chart only dates back 1 year... why not do a 5 year comparison? Oh right.. because Apple stock has outperformed AOL by a factor of 2 even with the recent 30% dive in market value.
- WayneS 13y agoSo they profit from idiots? That is a pretty good strategy, they will never run out.
- dgbsco 13y agoMapQuest.
- Demiurge 13y agoAOL also own Winamp, my favorite music (and internet radio) app since the 90's :(
- rokhayakebe 13y agoI am wondering they don't run TV ads targeted towards this demographic.