Most of AOL's Profits Come from Dial-Up Internet Subscriptions
On the surface, things look pretty good for AOL. The company’s stock price has been steadily climbing, and it seems to have embraced its identity as a media company after acquisitions of major news and technology websites. Numbers released today showed that the company is even becoming profitable again. It makes you wonder — should AOL have been the comeback company of 2012?
And then you take a look at the company’s financial reports and see where most of its profits are coming from: dial-up Internet subscribers. Yes, the same service AOL was peddling back in the 1990s is still somehow alive and kicking. Somewhere in the United States, there are people who are still connecting to the Internet using a dial-up modem — enough of them for AOL to rake in $500 million on these subscriptions alone. That’s pretty mind-blowing.
The point is this: AOL looks financially strong, but the company is far from future-proof. Courtesy of Wikipedia, here is a graph detailing the decline in AOL dial-up subscriptions from 2001 through 2009.
That’s not the kind of slide you want to see for your most-profitable service. And it’s not one that can be turned around, either. That line will continue toward the floor as more consumers opt for high-speed Internet through a cable or fiber provider. And, as more people rid themselves of their home telephone service, they won’t even have a phone line to use for AOL. Broadband Internet providers and wireless carriers are taking turns punching AOL on each side of the face, and both AOL and its stockholders don’t seem particularly concerned.
AOL’s future is obviously in its content. The company has made wise moves in the media space, scooping up blogs like The Huffington Post, TechCrunch, and Engadget — sites with established brand cachets and loyal audiences. But the company is going to need serious returns on those investments in the form of ad sales, and it’ll have to scale its content business and ad sales to meet or surpass that $500 million mark.
Someday, we’ll all be talking about dial-up Internet access like we talk about muskets; slow, inefficient tools that were replaced by better, faster options. And you’ll be able to look at a dial-up modem in a museum. AOL needs to be ready for when that day comes. At this point, I’m not sure it is.