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AOL's Case: 'Great year, good quarter, bad day'

Published on .

America Online Chairman-CEO Steve Case described his Vienna, Va.-based service this way in a Thursday conference call: "a great year, a pretty good quarter, and a bad day yesterday.".

The great year referred to the service's 120% growth in fourth quarter revenues that catapulted AOL's fiscal 1996 revenues above the $1 billion mark. For 1996, AOL revenues were $1.1 billion, almost three times higher than 1995's $394 million revenues..

Fourth quarter revenues were $334.4 million. Of that sum, revenues including online merchandise sales and interactive ad revenues climbed more than 68% during the quarter to $31.3 million from $18.6 million in Q4 1995.

The bad day referred to Wednesday, Aug. 6, the day America's largest online service entered an 18-hour service outage that disabled all 6.2 million of its subscribers from connecting to AOL..

The problems which caused the outage were described to the press and analysts as stemming from equipment malfunctions taking place during a routine software update on the service's main servers..

Because the problems took place when they did (during software installation) they were difficult to diagnose, Mr. Case said. Customers will receive a free day of service to compensate for the inconvenience, he said, representing a loss of $3 million in service revenue.

In other news, the service will continue to focus its marketing and customer acquisition efforts on early adopters with major new marketing efforts beginning in October from TBWA Chiat/Day, New York..

Mr. Case said AOL's effort would take a "benefit-oriented" approach, drawing on TV, infomercials, continued disk distribution and direct mail. "We've done a good job of getting disks in people's hands," he said, adding though that the service needs to begin better "articulating why AOL is different." AOL will also be bundled with Windows 95, on Macintosh hard drives, and via the AT&T WorldNet service.

He said through these efforts the service is "gunning for 10 million members in a year" and that it also expects to draw heavily on alternative revenue streams going forward in 1997. One such revenue stream comes from a new 20/20 pricing plan, in which users get 20 hours of service a month for $20. So far, Mr. Case said 800,000 users have chosen that plan which was launched in July.

Copyright August 1996 Crain Communications Inc.

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