CONVENIENCE ISSUE PRESSES ONLINE DEVELOPMENT
Byline: Vicki M. Young
NEW YORK — Consumers’ insistence on convenience and the quest for new revenue streams are pushing Internet providers to give their customers new multitask options online.
Those were the common threads running through presentations last week by Robert Pittman, president and chief operating officer of America Online, and George Bell, president and chief executive of Excite@Home, during a PaineWebber Internet Conference at the Grand Hyatt here.
Bell said advertisers were willing to pay higher rates for broadband ads than for standard banner ads.
That’s one reason for the company’s push to launch a high-speed broadband version of its Internet portal later this month.
According to Bell, broadband can provide “in-the-box functionality” so consumers can shop online without leaving the current viewing page. “Ads,” he said, “can be seen on the page, along with content.”
Narrow band or dial-up access, the prevailing standard, requires consumers to click on the ad, but then takes them away from the page they were viewing.
About 55 percent of Excite subscribers use the service at least once a month. Bell noted that of these, 92 percent browse online for information and services and about 85 percent purchase products and services.
The enhancement of broadband, which will cost subscribers about twice the current monthly fee of $20, will allow consumers to shop while channel surfing or Web surfing, he said.
“They can shrink the television screen while ordering pizza online,” Bell said, noting the convenience of how “we have their credit card numbers embedded in the Excite portal.”
Convenience is a key component of AOL’s plans for the future.
Its merger with Time Warner, Pittman noted, makes strategic sense because it will “create new businesses that neither one of us could create alone.”
One such possibility — fusing synergy with its merger partner and consumer convenience — could involve integrated shopping based on what consumers are watching on their television sets. Without elaborating on plans, he cited AOL TV as a possible venture that would combine corporate competencies into a new industry.
Integrated shopping, he said, can include performing multiple tasks on the Internet or having the ability to click on a link to purchase an outfit worn by a television star while the television show is in progress.
Pittman told the audience of Internet investors and company executives, “People want you to save them time.” Doing so helps the company establish loyalty to the AOL brand.
“When consumers pay for the subscription, the relationship has meaning for people….Consumers want trusted brands, anytime, anywhere,” Pittman said.
One example of convenience, he said, was how the magazine subscription process can be improved through the AOL service. “We have the credit card on file, so we never have to bill you. You have to ask us to stop,” Pittman pointed out. The synergies and reduction in costs, he noted, will come from bundling existing services with features and options that already exist across all properties at prices that are affordable.
The AOL executive added that, regardless of the industry, two general premises remain constant: “Brands win [and] convenience is king. The laws of consumer behavior still apply to the Internet.”
The typical AOL member uses the service more than five days per week, spending an average of 63 minutes a day online. About 50 percent of online usage is for commerce, service and content. Another 40 percent is communicating through e-mail and chatting online. “They do online exactly what they do offline,” Pittman said.
Pittman disclosed that members are also investing their time in “sticky” applications. “We have their name, buddy list, calendar, archives and stock portfolio. It’s a wonderful business. If they give up AOL, they give up a lot.”
As for possible strategic alliances overseas, Pittman said, “Our goal is not partnership, it’s [about] winning. We will do whatever it takes, regardless of the permutation.”
He also tackled the issue of tracking where consumers surf, stating, “We’ve always smelled that consumers are concerned about their privacy.”
AOL places cookies on a user’s hard drive, and generally uses pop-up ads for its own advertisements.
Calling the approach “creepy” with a “stalker” atmosphere, Pittman explained that consumers who are interested in sports will get general sports-related ads, but not necessarily any selling sports products from the sites where the users last shopped.
Pittman said the Time Warner merger, when completed, is expected to result in savings of $1 billion in the first year of the combined firm. The expected revenue for 2001 is $40 billion, with a 12 percent to 15 percent annual growth rate thereafter.
He projected growth in earnings before interest, taxes, depreciation and amortization at 30 percent in the first year and 25 percent thereafter.