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60% of AOL's Profits Come From Misinformed Customers
satuon writes "Ken Auletta's big New Yorker piece on AOL (subscription only) this week revealed an interesting detail about the company's inner workings. According to Auletta, 80% of AOL's profits come from subscribers, and 75% of those subscribers are paying for something they don't actually need. According to Auletta: "The company still gets eighty percent of its profits from subscribers, many of whom are older people who have cable or DSL service but don't realize that they need not pay an additional twenty-five dollars a month to get online and check their e-mail. 'The dirty little secret,' a former AOL executive says, 'is that seventy-five percent of the people who subscribe to AOL's dial-up service don't need it.'"
Who are the other two? And particularly the person who actually NEEDS AOL?
We've tried, and she actually understands. But she's hooked on the "experience". Maybe she just likes some disembodied voice telling her that her internet is up or down.
Well, maybe it will go away once she starts using a smartphone and starts uploading all her stuff into the cloud. That doesn't seem like a very compelling argument we have to make to her, though.
Someday this will not be true.
How sorry I feel for the 25% of subscribers that do need AOL!
So, essentially the bottom line of AOL is bolstered by "inertia"? Is there a compelling reason why someone hasn't told the investors and / or the people getting bilked?
As an in home tech I think 99% of people that I saw paying for aol didn't actually use dial up. Most of the time it wasn't worth trying to explain why they were essentially throwing away $25 a month, until I told them that my services would pay for themselves after only 4 months.
http://www.sec.gov/Archives/edgar/data/1468516/000119312510245249/d10q.htm Page 10.
We had a cable modem in the house, but my mother insisted on using dialup to AOL. She used to because it was easy, and she could chat with all her friends back home. As Skype, facebook, and other tools became more mature she dropped AOL. I think this was only about a year ago.
Oh wait, hold that thought for another 17 hours, there's no stocks trading on sundays..
Quack damn you!
I had always assumed that 100% of their userbase were misinformed customers. Whats the excuse of that other 40% then?
I find that hard to believe.
I might believe you if you said 100%.
Do daemons dream of electric sleep()?
My aunt and uncle were AOL subscribers for years because they couldn't get broadband from the cable company or DSL from the phone company. Part of the problem might have been they had an unusual postal address, a road extension, not just a site on the road, which may have confused their databases, but eventually the power company came in, and I managed to get access to a supervisor who knew the area and would authorize an installer to come out.
Yay.
But they had to quit AOL first. It took several minutes of persuasion from the person at their customer service, and more than a little crying.
I swear, they must be specially trained to be so emotionally manipulative.
Oh well, at least they have 30 Mbps now. What do they need it for? Next to nothing, but EPB doesn't offer anything slower. How inconsiderate of them, isn't it??
Please, slashdotters, don't respond to this obvious troll. Thank you for your support.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
How to Cancel an AOL Dial-Up Service By Stacey Price, eHow Contributor
Canceling your AOL account is a simple task that can be done over the phone or online. With the integration of AOL's free web-based email service, you can cancel your dial-up service and still enjoy some of their features by converting to a free AOL account if you have an Internet connection.
Instructions
Things You'll Need:
Tips & Warnings
AOL Inc.
PO Box 65100
Sterling, VA 20165-8800
Source: http://www.ehow.com/how_5955872_cancel-aol-dial_up-service.html
Quack damn you!
It took me YEARS to wean most of my AOL using friends/relatives off of AOL. Once something winds up getting "automatically charged" on their credit card every month, a lot of folks are just too lazy to change. None of them were using any of AOL's "value added services" and it was just an email application for them. Most of them already had high speed internet from their cable company or a telco DSL line already. They're all using gmail now.
A subscription that nobody needs? Oh, the irony.
The only secret about this is that 75% is shockingly low. Is AOL known for anything other than elder fraud?
Wait.... people still use AOL? I thought that died off years ago with the onset of DSL and Cable available in the majority of areas across the country.
I have karma to burn, kids. Moderate away. I will eat your modpoints for breakfast and come back for lunch.
"You're right," Fisheye says. "I should have set it on 'whip' or 'chop.'"
Sounds like a class action lawsuit to me.
No, I'm being serious. This is an abusive business practice. In financial circles, similar actions to intentionally mislead clients, especially elderly ones, especially by omission of whether a particular service is needed or not, is a very big deal and results in loss of license to the sales agent and potentially punitive action by the SEC to the employing firm. The scales of money are different, but the sleazy flavor is the same.
Put my fist through my alarm clock with its ding-dong death inside my ear. - The Blackjacks.
Only this isn't going to kill them...
I found my mother was being billed $50/month by earthlink even though she had service through another ISP. The phone number earthlink claimed they were providing service to was not only in another area code but did not even exist in that area code. When I complained to earthlink that they had stolen thousands of dollars from her over the years they just said "Earrthlink is not a usage based service". Of course not, especially when they supply service to telephone numbers that don't exist.
It get's worse. actually. I had canceled her service. but it turns out they called her back aftrwards and asked if she was unsatisfied and would she like to continue the service. They then told her that given her usage patterns they reccomended she buy extra space! Extra space on an account that she could not even use if she wanted to.
Never got any money back. Thieves. Boycott Earthlink.
Some drink at the fountain of knowledge. Others just gargle.
How is AOL any easier than opening up a web browser? Somebody should ask this to anybody who claims it's easier.
Here's their sec filing if you want to look for it yourself:
http://www.sec.gov/Archives/edgar/data/1468516/000119312510245249/d10q.htm
This was discussed on reddit very recently:
http://www.reddit.com/r/technology/comments/f71tv/that_post_about_how_80_of_aols_revenue_comes_from/
They were very critical there of an earlier story that was upvoted quickly but which was apparently well wide of the mark.
I suspect this sensationalist headline will be too - feel free to check.
TODO: 753) write sig.
I don't understand. There is a whole spectrum of abuses on the Internet.
Comcast blocks port 25 and port 80 (inbound) so its impossible for me to run a mail service or a web service from a home computer. I'm forced to rely on service providers other than myself.
AOL is taking advantage of the uninformed. But other ISPs are preventing users from independence in other ways.
Sadly, fighting for an open Internet is getting harder and harder.
I've got an older friend I've tried for years to get to drop her AOL account but she uses the e-mail address for business and is terrified of switching to a free service. I'd say the vast majority are just afraid of changing and loosing their e-mail address. I think if they made their e-mail free and not tied to the service and made people aware of this they'd go out of business overnight. There are still some that depend on the dial up but I'd say most it's the e-mail keeping them paying the one armed bandit.
I once saw an older woman come into a local super market a few years ago and ask a fellow employee where the AOL CDs were. before the greeter could send the woman on a pointless trek to the opposite side of the store, I told the woman that we didn't have any and that I haven't seen an AOL CD in years, and that she should contact her phone company for internet access. The customer then asked if I knew of any other stores that might have AOL CDs.
But then again, unneed services pad many a ledger, not just AOL's.
That said if the estimate is right it is a pretty huge chunk of their revenue.
One thing to remember for all the people going OFF aol- the cheapest subscription (4.99 IIRC) gets "free" McAfee virus protection with automatic updates etc.- I never have to worry about my mom's AV program. It might be worth it to me!
I always assumed that the people that still used AOL simply didn't remember to cancel their service years ago or were deceased (somehow still paying the bill)
seventy-five percent of the people who subscribe to AOL's dial-up service don't need it.
Many dozens of times I've seen customers come in that are using AOL with their DSL. I don't see it so much with cable because the majority of people using AOL are using it because cable isn't available to them, they're too far from the city, but DSL is available and they've had it for years. Many of them signed up for their DSL (service by Qwest, formerly AT&T) through AOL and don't even realize it's not AOL providing it.
So I ask them why they are still using AOL, and it quickly becomes apparent that they believe that AOL is the internet. I'm able to reason with some of them, but even a percentage of those still want to keep AOL because they're comfortable with it. Me personally, having to change my email address would be the big problem. But last I checked, AOL reduces your charges down to something like $9.99/month if you just want to keep email and not have the rest of their service such as dial-up. But even when I explain this to them, many are just not interested in it. Many years ago when I quit my dialup, I switched to my isp's "email only" plan for that same amount and kept it for about 6 months, and it made the transition to cable a lot smoother for me.
I try to explain it to them, how using a local email app on your computer makes things like managing attachments so much easier, but a lot of these people just aren't interested in anything making their computer use unfamiliar again even if only for a brief time. They're in their secure zone and don't want to leave. Only just this year I finally got my next-door neighbor to drop AOL after showing her just how much easier it was to email photos from her new digital camera using a local email app.
And I'll just toss it right out there - they're all old people Every last one of them. So eventually AOL's user-base is going to literally die off.
I work for the Department of Redundancy Department.
My mother used to pay for AOL and DSL from a different service. If that little email icon was not on the top left she wouldn't know how to check mail.
And they would never use the internet with the little blue "e". They would open up a browser within AOL's program.
Wait, a print magazine is covering the impending demise of an internet company which is failing to adapt to its business model becoming obsolete.
P.S. Yeah, I know AOL is/was not the internet but you can get there here from there (at 56Kbps).
Failure to follow this advice may result in non-deterministic behavior.
The actions (or inactions really) of AOL remind me of a paraphrase of the old addage "what you don't know, won't hurt you". That paraphrase would be in this case "what they (AOL's customers) don't know, won't hurt us (AOL)". Sigh...
Sometimes, real fast is almost as good as real-time.
Ubuntu.
WTF am I doing replying to an AC at 5 A.M on a Friday night?
Way back when, in the IRC channels I used to hang out, many of those had *!*@*.aol.com bans standard. Because AOL users "were stupid". Perhaps they were right...
AOL has claimed in the past that its subscriber base hit 30 million, this was probably somewhat exaggerated (rounding up a couple of million) but taking them at their word their subscriber base is now something like 3.3 million. Not quite 90% yet, but they have been losing at least half a million per quarter so we are only a couple of months out from that mark.
Any mass auto-billing subscription service that is going to have some fraction of subscribers who are inappropriately signed up through ignorance or error. On your way down to zero again it is inevitable that you will reach the point where these are essentially your only remaining customers. Approaching the 90% decline point, AOL clearly reached that stage some time back.
I await to see how AOL will arrange to screw their last few customers when the service is finally shut down.
Starships were meant to fly, Hands up and touch the sky - Nicky Minaj
...if it wasn't on Slashdot.org. Additionally, AOL should be happy this wasn't reported as 'XX% of AOL Customers Are Lied To And Preyed Upon'.
This is nothing new for the telecomm industry, a dishonest and shady business where the management treat the subordinates like animals in a circus of customer service. I've seen it time and time again, first-hand, with these kinds of situations. Poor training, a lack of inter-business organization and communication, little or no policies or plans that help solve customer problems, as well as over-bearing, contradictory, inaccurate and deliberately misrepresented information/statistics help the overgrown telecomm companies do what they do best: imposing themselves upon their customers to make money. They hire contractors and push HUGE incentives for getting new subscribers and when the contract is up and 50% of the new customers were lied to about their services, it's okay because they've already fired the contractor and the customer is bound by the contract they signed. Spend any amount of time with any of those companies and you'll see how other peoples ignorance becomes some executives bank-rolling bliss.
"Only when the last tree has been cut down; Only when the last river has been poisoned; Only when the last fish has been caught; Only then will you find that money cannot be eaten."
What's AOL?
This is a hacked account, for which the owner can not be held responsible.
My dad knows he could move to Comcast email and quite consciously made the decision to stay with AOL as his friends could never all make the change to a new email address. Dad is 90. It is not all senility, but sometimes it is "inflexible" friends.
I used to worked at an ISP who had about 25 000 dialup subscribers. (And about 10 000 DSL) They were playing around with the idea of charging a couple more bucks for the service. I got asked to generate a connection usage report. Turns out 60% of the dialup customers had not connected to their service in the past 3 months. (That was 2 years ago, so 75% today would not surprise me at all)
When people are used to automatic billing either on their bank account or their credit card, they tend to forget that they're paying for some services they are not using.
No, I'm being serious. This is an abusive business practice. In financial circles, similar actions to intentionally mislead clients, especially elderly ones, especially by omission of whether a particular service is needed or not, is a very big deal and results in loss of license to the sales agent and potentially punitive action by the SEC to the employing firm. The scales of money are different, but the sleazy flavor is the same.
The major difference is that your financial advisor typically has a fiduciary responsibility to act in your best interests. It is thus illegal for that person, whom you have hired, to act in any way other than to do what's best for you. Vendors of widgets and purveyors of services that don't constitute personal advice generally have no such responsibility.
That's not to say that outright fraud is ever legal. Any vendor is required to avoid lying about their goods or products. However, unless you've hired them to do so, they're not required to determine whether or not you need a specific level of service.
It's not AOL's job to put themselves out of business by telling customers that they're no longer needed. Some of their practices definitely seem shady (like making it all but impossible to cancel an account). And if reps are actually lying by claiming that their service is mandatory to get email when a broadband connection is present, that would probably be illegal too. But trying to convince customers that their service is desirable (even if the rationale seems nuts to a techie) isn't illegal*.
*I'm not a lawyer, I just impersonate one at parties to bag attractive golddiggers. This post does not constitute legal advice in any jurisdiction outside (and possibly inside) the Pricipality of Sealand.
Posted by samzenpus on Sunday January 23, @09:58AM from the check-your-math-again dept.
Apparently samzenpus doesn't understand that 75% of 80% of a total does in fact equal 60% of the total.
AOL still makes profit.
Alright! Another devoid-of-any-context-whatsoever Ubuntu post!
Not devoid of context. Using an insecure and expensive OS when there are ethical, free, secure alternatives is just plain idiotic.
WTF am I doing replying to an AC at 5 A.M on a Friday night?
This was re-debunked on reddit yesterday.
http://www.reddit.com/r/technology/comments/f71tv/that_post_about_how_80_of_aols_revenue_comes_from
Of course, given any non-negligible absolute number of people who are in this situation it behooves us as techies to get their stuff straightened out so they're not paying for something they don't need. So what's the real problem? That these x00,000 people don't have a closer family member who is a techie?
Maybe we need to start sticking our noses into the business of anyone we know that sends e-mail from an aol address? In as friendly a way as possible, of course.
Yeah, but why doesn't anyone post one-word "Debian", 'slackware", or "SuSE" posts, maybe with a dash of "NetBSD" for flavor?
Oh, maybe it's because users of those OSes have brains enough not to think that what works for them must automatically work for everyone else.
The Ubuntu fanboyism seen on /. is just as annoying and pointless as the "Get a Mac" fanboyism seen elsewhere online.
Most of them would still use Microsoft, dude.
With Microsoft, (and Apple, for that matter) at least you have a throat to choke when it breaks.
Linux has its place, but Linux desktops only work if you actually know what you're doing, and it is a nightmare to keep them working over time, let alone in the present (just look at installing Flash and Java for example to view common websites)...once a new release of whatever distro comes out the old distros fall by the wayside.
The distros change so much so fast that it does not provide a stable target platform for commercial developers either. So that means zero to very few commmercial apps for you. One of the biggest advantages of MS and Apple platforms is that they are platforms...and if you write an app for version $foo, $foo will be around long enough for you to complete development, and ship your software package to brick and mortar stores... and the consumer can see the version requirements on the box.
The throat you have to choke when it breaks is your own....or you can scrape the internet for technical answers, which is beyond the capability of most people.
I mean, I do like Linux, but I would never put my parents on it.
60% of all profits come from selling people things they don't need. Why is AOL being singled out?
At in Germany Internet was just essentially free. You had some "Bürgernetzverein" which provided free Internet paid for by its members.
Being a dial-up provider now is in fact even easier than ever before. You just set up a modem on your 3rd phone number and there you go.
However flat rate telephone service came only after DSL so dial-up quickly disappeared because it was hugely expensive.
I don't see the point in signing up if I'm not planning on using 90% of the features.
It keeps your friends from threatening to make a Facebook page for you, without your consent because they feel that you are a Luddite hiding behind silly "privacy concerns." Though I've pretty well trained most of them to email me important info, except the one who put all their wedding planing info ONLY on Facebook and expected us to all magically know which hotel, where the reception was, what time, etc.
"You saved 1968." - Ms. Valerie Pringle to the crew of Apollo 8
I'm quite informed of the alternatives: Linux sucks monkey balls for daily desktop use, and a Mac is far too expensive in my opinion (great machines though, I can't knock the quality).
Windows, however, offers a great desktop at a reasonable price. Since I can't get a PC I like with Linux that is cheaper than a PC I like with Windows, so the fact that Linux is free* is a moot point.
You may be an exception, but I find most people who bash Windows, particularly Vista and 7, have at most a very limited experience with them. Vista was horrible at release, but since SP2 it has been great, and 7 was great out of the gate. I much prefer XP to Linux, and I prefer Vista and 7 both to XP. I actually used Linux for over a year while Vista sucked (my laptop came with Vista), I eventually had to switch back to Vista because I was wasting far too much time fixing stupid problems in Linux. Fortunately by then the wrinkles in Vista had been fixed (though there was no fixing its reputation - the damage was done).
*Linux is only free if you consider your time to be worthless. If you consider your time to be worth something, like I do, Windows pays for itself in a few months even on a minimum wage salary. That's at full price, too. I never pay full price for Windows if I can avoid it, and I'm an IT guy, I can always avoid it.
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
If they only needed email anyway, and they got that from AOL dialup, how did they get convinced to get broadband in addition to AOL?
WTF is this gibberish? My best guess is 80% of profits come from all subscribers (an irrelevant "fact") and 75% of dial-up subscribers do not need the dial-up, which is interesting only if there's too many of them to account for the folks who have it as back-up. Mish-mash the two together into the gibberish summary however and you have what looks like 80% of AOL profits come from dial-up subscribers of whom 75% don't need it.
I did consider that it is possible (however implausible) that indeed summary intended to say the latter, in which I call BS. The 10K shows subscriber sales of $244.8m and total net profit of $171.6m (80% of which is $137m). So we'd be saying that, at an absolute minimum, requiring dial-up to have zero cost, over 56% of ALL of AOL's subscriber sales is for dial-up?
If that wasn't implausible enough, summary implies 75% of dial-up customers don't need it because they have cable/dsl, so we're getting an absolute minimum of 56% of $sales from an absolute maximum of 75% of the number of subscriber customers, hence (though I really don't trust my maths here) dial-up must cost >70% more than cable/dsl subscription does? I can't be arsed trying to get around AOL's country redirect to find out what the dial-up subscription costs since it isn't even advertised in the UK and AOL have one of those country redirects.
I'm going to call BS even on the idea that 80% of profit comes from all subscribers, since that'd require an epic 56% net profit ratio, oh and anyway 42% actually came from "discontinued operations" and, since I'm guessing dial-up operations are continuing, that does not leave the necessary 80% for subscriptions.
Am I missing some other, actually plausable interpretation of the summary? Am I totally not getting something, perhaps due to standard practice in US that isn't ver here?
Incidentally there is no useful reportable segment info in the 10K so I've no idea how these figures were calculated, though they do look suspiciously round.
Not quite 90% yet, but they have been losing at least half a million per quarter so we are only a couple of months out from that mark.
So how long until they have negative subscribers?
I am not an Ubuntu fanboy, and I actually use Slackware (and I've used it since version 3).
I said Ubuntu because it's simple and adequate for old people that have a hard time using computers.
WTF am I doing replying to an AC at 5 A.M on a Friday night?
Bush is Hitler.
I use Linux.
Palin is dumb.
Google is not evil.
I am a Slashdotter bot.
But AOL is notorious for continuing to bill you, some time for months after you have told them to cancel...
On, the other hand, I have one friend who stubbornly refuses to upgrade either his computer or his dial up account, he has this "high tech thing" and why would
he pay to get another one while the old one is still working? (He won't get a car either, I think he expects buggies to be making a comeback). Ironically he DID get a top of the line DIGITAL camera and edits his pictures on his FLINTSTONE era computer. He is normal in most respects, but gads man get a new computer and internet link...
This is an invitation to all to check out www.merlinslibrary.com, a wiki site where you can upload all your favorite links to help each other find good sites. All you need to do is just find the appropriate topic or create a new article and upload the link. It's that easy! So check out www.merlinslibrary.com
Honestly, many old people don't like change. It's bad enough when you change their screen resolution and all their prior computer knowledge goes completely out of the window and are completely unable to use the computer because "it's all different".
Posting anon due to having spent moderation points.
Probably most of them, because Microsoft still has an applications barrier to entry. Judge Jackson's remedies were overturned, and replaced with a slap on the wrist.
Anonymously posted FUD. There are a lot of Linux distributions that are very user friendly. The lack of commercial applications is due to low market share rather than platform instability.
Daily desktop use is subjective. For gamers, Windows is the only alternative right now, but for internet and office usage most Linux distributions work perfectly fine out of the box.
The "I tried Linux once, and now I'm qualified to generalize about it." stance is pretty disingenuous. It makes the time comment irrelevant. The IT guy qualifier also means practically nothing; there are many levels and types of IT capability.
That is, until they want to use their wireless adapter.
Back in the day when AOL 2.0 came out it made it so easy to connect our family that was spread across the USA that I ended up talking EVERYONE into joining the service. AOL was a champ at dumbing down the world wide web. Well... is it any surprise that only dummies are left?
Eventually Steve Case convinced me to leave and I was the first to go.
Everyone in my family has moved onto Facebook as the means of inter-family communication except for one sister. I wouldn't normally consider her a "dummy" but she "likes the experience".
Whatchagonnado?
Changing the world... one research project at a time.
Sure but first I have to go out and buy the latest Sugar Ray CD.
I went to battle M.C. Escher, but drew a blank.
Years ago AOL told my best friend's mother tried to cancel AOL after getting Road Runner. They told her that she still needed an ISP. I quickly explained that Road Runner was her ISP. She could still use AOL software without paying the money. Finally she was able to get them to quit charging her. They got away with that for years. The most unethical business practices of just about any business out there. I am glad those crooks can sleep well at night knowing that they prey on the ignorance of others. Throw a bunch of technical jargon around and scare the caller into believing they need their service. AOL is like a bunch of thugs in a mafia short of the big guy coming by and breaking your legs for not paying. Everyone has heard the stories of trying to cancel. It took a few recorded phone calls getting published online to show it to the general public before they made it easier to cancel the service. In the end they will have to answer to God for all of their lies, cheating, deception, and fraud. I would love to see AOL close its doors but I know that is merely a dream. Perhaps in due time.
The other 20% of AOL's profits come from selling to other businesses the list of people stupid enough to pay for a service they don't need! THAT is a demographic most companies would be eager to target!
I've abandoned my search for truth; now I'm just looking for some useful delusions.
Much less.. they make profit? What a blast from the past..
The Acer Aspire I bought last April (and was stolen in September) came with Windows 7, but after putting up with crashes that probably weren't really MS's fault (because both Windows and Linux had problems in hibernate mode), I wiped Windows and installed kubuntu. No wireless problems at all.
Your information is far out of date.
OTOH, several years ago I upgraded 98 to XP, and the first thing Microsoft did after I installed it was to replace my perfectly good network driver with one that simply did not work. I thought the modem was broken, the ISP's help desk thought I had a bad NIC, and had I not had to reinstall Windows because of another problem* caused by MS's total lack of useability I'd have just bought a new NIC.
If I and my ISP's tech people couldn't figure the problem out, there's no way Grandma could.
* I installed the software that came with the CD burner, and Windows disabled it. After it was disabled it couldn't be uninstalled, and gave me a message on every boot telling me it had disabled the CD burner. Dumb, dumb, dumb. Granny couldn't have fixed that, either. Microsoft's touted useability and Linux's touted unusability are both sorry myths.
Free Martian Whores!