Chasing The Running Man

2006-05-09T12:31:00.000-07:00

AOL has extended its AIM product line by improving what nearly every user already has. AIM user profiles have become AIM pages, part of a broader social network. This catches AOL up with MSN, which has already integrated MSN Spaces into its consumer messaging products.

Interestingly, AOL has realized that it has entered later in the game than its competitors: AIM pages pull content from non-AOL sites; whereas, Microsoft controls its platform. The distinction is that AIM Pages profiles will be more customizable because of AOL's "Open Profile System."

AOL has developed "scarapers" to copy MySpace content to AIM profiles.

Customizations are more streamlined than other social networking sites, as is to be expected from AOL because ease of use is one of its core competencies. Modules can be added by clicking and dragging rather than by editing HTML, but editing raw HTML is still allowed.

A feature called "Buddy Updates" alerts users when a buddy has updated their page. Like MSN notifications, Buddy Updates are RSS formatted. Only buddies receive these alerts, but anyone can search through profiles. Privacy controls are forthcoming.

As AIM Pages matures beyond a profile product look for more value-added features like group pages.

AOL has entered the market within the growth stage of the social networking product life cycle. The strength and reach of the AIM brand makes it a contender. 50 percent of Americans ages 13-25 use AOL Instant Messenger. Worldwide, AOL's IM products have 80 million user accounts.

It will be interesting to see how it pans out, because many of these users already belong to several other social networking Web sites. Will "Open Profiles" with pulled content be enough to convince AIM users that AOL is a better place to interact with their buddies? We'll see.

2006-04-07T14:38:00.000-07:00

My Little AOL

I missed CTIA, but had received a heads up that AOL was expanding its mobile offerings. The first new service is a mobile browsing technology that reduces the size of Web pages for small screens; the other an expanded search product enhanced with mapping.

If my memory serves me correctly, these services had been live at the AOL beta site for several months. It makes sense to modify the layout in light of a Pew survey that found that 30 percent of adults want to browse the Web from their mobile phone and AOL has not dragged its feet to fulfill that demand.

The miniaturized AOL portal extends its existing search properties to mobile users: shopping, local search and Web search. A partnership with MapQuest places AOL's capabilities on par with Google and MSN. MapQuest will soon offer GPS services.

AOL has also wisely outsourced the miniaturization engine to InfoGin. Miniaturization software already exists and it was not necessary for a media company like AOL to develop its own.

I said on par because some mobile services are limited to specific phone and smart phone models - not everybody can use these services. For instance, the richest mobile AIM application requires a smart phone or series 60 device.

Text messaging and IM forwarding are available to nearly everyone, but true present and buddy list functionality aren't. I found this out when I attempted to set up AIM on an unlocked Nokia 6822. I eventually "hacked" my configuration with information from a BBS, but I access AOL's servers through Nokia's clumsy application.

Yes it is real time, but no is not a rich application. Even it my phone supported mobile AIM, it costs $20. AOL would be better off charging a subscription fee in partnership with carriers. AOL has made its software available to Sprint subscribers, but there is still limited choice.

Not every customer wants to buy a phone from Sprint; there are many compatible unlocked phones. Cell phone manufacturers and carriers may be the last walled garden because they needlessly differentiate models, limiting their capabilities and generating a disjointed experience across their product lines.

Take a look at Google Mobile or AOL mobile and you'll see what I mean. You actually need to find your model. If it is not supported you are out of luck. Personally, I feel that carriers suffer from myopic vision and should allow developers and portals open access. 3G support also lags.

Until then, services such as these will not reach all prospective customers. Isn't that what AOL is attempting to do? Shame on its partners.

2006-03-25T16:50:00.000-08:00

In2TV: AOL'S Hidden Gem

America Online has put some of Time Warner’s on the Web. While iTunes and CBS are charging for episodic content, AOL is giving it away for free. All it asks is that its users endure less than two minutes worth of advertisements from its sponsors. The service is called In2TV.

People who are “in the know” understand that the best place to find the most comprehensive collective of TV shows on the Web is a Torrent Web site. Let’s face it; P2P is the best vehicle to distribute large files, but most torrent downloads from popular index sites such as Torrent Spy and IsoHunt are illegal.

AOL’s answer to that trend is its Hi-Q P2P software, developed by Kontiki. Users benefit from the efficiencies of P2P, but AOL’s digital rights management keeps it within the law. What’s more, AOL is also much more reliable than traditional P2P. Although, it shares a common flaw with most P2P clients: its software wanted to load in the system tray at Windows start up.

The perception of Joe User may be, "more bloatware from AOL." Anyone that has installed the Triton AIM client knows what I am talking about.

Thus far, AOL is offering up: Babylon 5; Eight is Enough; F Troop; Falcon Crest; Growing Pains; Head of the Class; La Femme Nikita; Pinky and the Brain; Sisters; and Welcome Back, Kotter. There is also a series of pilot episodes. A full season of each show is available for show enthusiasts to get their fix.

Naturally, I gave it a whirl. Recalling my youth, I clicked on Pinky and the Brain. Then process left me vexed - plug-ins and software installed, reinstalled, but then didn’t take. The DRM process through Windows Media Player was likewise not seemless. DRM should be transparent to users.

The process cycled until; finally I was able to watch. Now, the site works on the first click, but I almost surrendered. Hopefully these are growing pains.

Its system requirements are:

Operating System: Windows® XP, 32 bit or 64 bit
Media Player: Windows® Media Player version 10.0 get it HERE!
Web Browser: Internet Explorer 6.0+, Netscape® 7.2 and 8.0+, Firefox® 1.0.7+
An Internet connection
Macromedia® Flash Player 8. Get it HERE!
In2TV video is only licensed for viewing in the United States.

Don’t ask me what happened, it was confusing and I didn’t take notes. Note that my preferred browser is Firefox 1.5. As you see, AOL claims that the browser is supported, but there must be some wrinkles to iron out.

It remains to be seen whether or not users want to sit in front of their computer to watch TV. Personally, I do, and Apple’s success is telling. iTunes will soon begin to sell monthly “subscriptions” for unlimited show downloads. Unlike other subscription price models, Apple permits ownership.

But Apple is encountering resistance from the Screen Actor’s Guild which wants a cut of the $2 sales for its members.

Eventually (probably sometime this year) AOL will launch a for-cost Video store. Episodes are expected to sell for $2 USD a piece with the option to subscribe. AOL has a proclivity for video; it is its core competency. In fact, a company spokesperson once told me that AOL was a media company above all else.

The problem is that people still associate the brand with the mind-numbing AOL client software and dropped dial-up connections. I spoke to several friends about In2TV, none of whom knew anything about it.

More than half of US households now have broadband, so the timing is right. AOL is making a substantial push to get its users onto broadband for its long-term well-being; its portal traffic has flattened out.

The long awaited synergies of the January 2000 AOL Time Warner merger are being realized. With the inclusion of HBO, AOL’s video library will be formidable. Logic dictates that it would have fewer troubles with the Screen Actor’s Guild because it is a producer and not a downstream firm like Apple is.

If I was Apple, I would be concerned about staying on top so long as AOL can drive traffic to its Web sites and work on that brand image problem.

2006-03-22T01:20:00.000-08:00

Gadgets and Gizmos? Just Make it Good.

AOL now understand that it is all about, "developers, developers, developers." IAMAlpha.com is an early mock up of a new AOL/AIM profiles platform that developers can use to build content modules based upon AOL's ModuleT open microformat. The modules syndicate mashups, Web content and Ajax applications that will be pieced together by an upcoming AIM page authoring tool.

Enough of the esoteric developer's babble; most of us are not developers. At some point or another (maybe after the domain name changes to IAmBeta) AOL/AIM users will be part of yet another Web community. AOL states that these profiles will make it easier to connect with buddies that have similar interests.

Tasking developers to build these modules is an approach AOL has in common with Microsoft, which is developing its Windows Live platform. I applaud AOL for its initiative, but conjecture that AOL most likely does not have equal billing with Microsoft in its experience partnering with developers. This will present a challenge to AOL as its builds it platform.

To be honest, I am not sure what most Web users would do with modules that are not preloaded. If the modules were preloaded there will just be Widgets and gadgets all over the place – great. AOL might be better off allowing its users to build a more personal page with a blog style view; making the modules available, but not "in your face."

FireFox's extensions platform is an effective system of distribution, but there is insufficient discover. Maybe AOL should have the profile page build itself by learning more about how each user is using their personal Web space.

2006-03-19T19:39:00.000-08:00

AOL is 'Open' for Business

It has finally happened, America Online has made good on its pledge to open the AIM platform to third-party developers. In doing so AOL has introduced a platform for real time communications that presents a true alternative to Microsoft.

There is no question in my mind that AOL has made a decisive maneuver. The question is how well the maneuver has been executed. Its licensing terms are a bitter pill for some developers to swallow, the source code remains off limits.

Beyond the obvious, my analysis is that AOL may be able to practice third-degree price discrimination by segmenting developers (more below). This translates to the possibility that the license key scale will not growth anytime soon.

A Platform not an Empire

Unlike Microsoft and others AOL has dropped its autocratic ways. In the past, AOL was in charge of its own growth.

AOL’s platform is endogenous: Plug-ins enrich its client software as developers will find new and inventive ways to utilize instant messaging; similarly, developers’ Web services will too.

For instance, a developer could conceivably link AIM with iTunes using a plug-in, making AIM more versatile, more like a multipurpose sidebar than a traditional IM client. Or, developer can create their own AIM client software.

It is important to note that the scope of the program is limited to consumers: Enterprise customers must work directly with AOL.

There is no question in my mind that AOL has made a decisive maneuver. The question is how well the maneuver has been executed. Its licensing terms are a bitter pill for some developers to swallow, the source code remains off limits, and my analysis is that AOL may be able to practice third-degree price discrimination by segmenting developers (more below).

The Walled Garden

At face value this ‘openness’ amounts to a major change of heart at AOL, which was once characterized as a “walled garden” for its disregard of the open Web and outside developers.
During its formative years, AOL’s approach to the open Web lacked enthusiasm, because its objective was to gain total control over access in the United States and soak up as much supplier power as it possibly could. The fewer the suppliers, the more powerful the supplier becomes.
From where it stood, becoming the primary gatekeeper to the Web was not a bad proposition.

Tear Down That Wall

Unfortunately for AOL, the market did not allow that to happen. AOL’s supplier power waned as alternative means of Internet access became widely available to consumers: Dial-up Internet access was becoming a commodity.

AOL then began to tout its brand’s attributes: universal access (AOL Everywhere), exclusive music and video, community, and safety. As other ISPs and portal sites began to offer substitutes, the value of AOL’s brand attributes fell and it failed to effectively differentiate its service. In the end, AOL began to hemorrhage subscribers.

On the upside, management at AOL was not so myopic in its vision to control Internet access within the past two years. I began talking to AOL on background about its “open audience strategy” around that same time. AIM and the Web were central to its decision to move most of its valued added properties to the Web.

AOL.com now provides the same exclusive music, video and now, even television programming (In2TV) that was all once solely available to AOL members. It also has an excellent search page that includes exclusive editorial content and vertical search capabilities courtesy of AOL’s SingFish.com.

In my opinion, this page trumps Google’s search results layout.

Open AIM will extend AOL’s presence services and enable rich scenarios for instant messaging that had not existed previously. Developers are the winners. AOL is also a winner: AIM already has millions of users; AOL now has a facility to add many more in new and difference ways.

The Bitter Pill

Now to the clincher: Is AOL’s Open AIM maneuver analogous to Bodie Miller’s tumbles at Torino? Already, developers are griping. This is a post from AOL’s own forums.

“Am I alone in thinking the license is a bit strict? The Skype license is pretty much "do as you please" and they let market forces decide who wrote a good plug-in. They also don't care if it is a commercial product or not.I'm especially unsure about all the telephony clauses. If I write something to switch AIM into a local phone circuit I can not certify the user will not call into a wireless carrier as opposed to a land based phone.Before I commit any time to this does anyone out there have a good rationalization”

Indeed, AOL has imposed restrictions. First off, The AIM API is exposed through a SDK – not source code. Secondly, the license key restricts log-ins to either 250,000 connections per day or two million each month.

A spokesperson told me that all it means is that, “We want to talk to you,” that they may want nothing at all from the developer other than a status report. Sure it creates uncertainty for developers, but I propose that the greater concern is that it provides AOL with a degree of monopoly power.

Here comes the dull economic jargon.

Third Degree Price Discrimination occurs when a seller is capable of segmenting its customers. AOL can do this very easily, by offering different perks or prices for each segment – anything that separates the market.

Furthermore, not all developers are the same so there are different elasticities of demand. This is a condition for price discrimination. A classic example is that a bus fare cost students more of their income than it would working adults.

AOL will set price like a monopoly, where its marginal costs are equal to its marginal revenue. Image a horizontal line being drawn out from this point until it intercepts the marginal revenue curve for each segment. AOL looks upward from this point to the demand curve to set the price on a per segment basis.

Monopolists do this to soak up consumer surplus, an act that is often seen as being detrimental to the consumer. The idea behind consumer surplus is that customers can get more than what they are willing to pay; the developer profits.

By setting a range of prices, AOL extracts the entire consumer surplus. This maximizes profits, and AOL maximizes its profits as any business would. There is a tremendous opportunity for AOL to make money off of this program.

At certain prices, AOL can increase its profits by selling less. To developers this may mean that AOL will continue restrictive licensing terms. To play devil’s advocate, certain customers may gain by paying less than if there were a single fixed price.

Likewise, prices can fall if AOL increases output and price discrimination permits this to happen. Increasing output lowers the average cost for all developers through economies of scale.

However, AOL is not selling bus tickets, just licenses. I do not feel that it will increase the output of licenses any time soon, especially considering that the program is new.

So, developers get to role the die with AOL. If AOL has good intentions, developers, may benefit. After all, who uses Skype? If it does not, it could simply soak every developer that goes off of its ‘free’ scale. It will be interesting to see how it all plays out.