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Wednesday, August 09, 2006

AOL And Jack Welsh


Jack Welsh used to say that he would not own any business that was not No.1 or No.2 in its industry. He sometimes broke his own rules with purchase of also-rans like brokerage Kidder Peabody. But, it is still solid advice.

According to NetRatings, Time Warner's AOL had 72 million domestic users in May. Yahoo! was first online with a little over 100 million. Google was second with 95.3 million and MSN was third with 94.3 million. Can AOL move up the chain once it offers more of its services for free? Maybe. But, fourth place in this race may be enough to operating a busines that is growing and where ad revenue offsets the drop in subscription income.

AOL has several other services and properties that certainly are at the top of the heap, it they can exploit them properly. AOL Instant Messenger. AOL Mail. MovieFone. Mapquest. ICQ. Each of these is in a position to drive more revenue as the company's model evolves to an ad-centric business.

One exception to this rule is Netscape. When AOL bought the browser company it has lost most of its share to Microsoft Internet Explorer. As a portal, it was always well behind the competition.

AOL recently made the decision to transform Netscape from a pure portal where you can get your weather, stock quotes, movie times and the like to a blog aggregations site. It would appear that the idea to transform the property is a failure, at least so far.

Based on data from Alexa, which measures online audience for website, Netscape's traffic rank among all websites has dropped from a three-month average of being the 238th most visited site on the web to No. 382 today. In terms of reach per million users, Netscape has dropped from a three month average of 3,180 to 2,350. Average page views have also dropped.

It may be very hard for AOL to move Netscape to the head of the list of blog posting sites. Properties like Digg appear to have a huge lead ranking at the 100th most visited site by Alexa. Several other blog search and aggregation sites also rank well ahead of Netscape. Blogger, owned by Google, is both a blog creation, aggregation and search site. Alexa ranks it 19th among all websites.

It would appear at first blush that Netscape would be a large money-maker in its former incarnation. It is hard to say if AOL can take it back to its former format, but it is worth considering.

Douglas A. McIntyre can be reached at He does not own securities in companies that he writes about.

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