In computer news this week, 10/29/2002

The ongoing AOL blues, or to everything, churn churn churn

Forbes magazine this week reports that in a classic case of buyers remorse, media mogul Ted Turner now is so angry with the bath he took on the AOL-Time-Warner deal, that he wants to drop Aol from the corporate name and spin it off. This media-hyped made in Heaven congolomerate was supposed to take over the world but has been a total bust.

Aol is currently the world's largest internet service provider, with a claimed user base of 35 million, but critics say those figures are exaggerated, and they also point out that AOL's monthly customer churn - or people trying then quitting the service - is as high as 10 %. Basic math then states that they would lose their theoretical numeric customer base in a year, but then replenish it through their giveaways and incredibly heavy advertising. More on this later.

A couple years ago Aol paid a 3.5 million dollar settlement with the SEC. In its administrative cease-and-desist order, the SEC found that AOL violated the reporting and books and records provisions of the federal securities laws in connection with its accounting for certain advertising costs during fiscal 1995 and 1996.

During that period AOL capitalized most of the costs of acquiring new subscribers - including the costs associated with sending computer disks to potential customers - and reported those costs as an asset on its balance sheet, instead of expensing them as incurred.

AOL reported profits for six of eight quarters in fiscal years 1995 and 1996, rather than the losses it would have reported had the costs been expensed as incurred. The advertising costs improperly capitalized on AOL's balance sheet reached approximately $385 million by September 30, 1996, when AOL wrote them off in their entirety.

So far in 2002 AOL has reduced its estimates for earning twice. Recently high ranking AOL executives have left the company, and the status of AOL founder Steve Case in the whole scenario is a question mark.

The US post office knows AOL as the heaviest mailing corporation in history; mailing millions of free aol trial membership disks, until technology changed, and then they mailed millions of free aol trial membership cd's. Millions of disks and cd's have been shipped to people who never asked for them, and many of them don't and won't ever have computers. At least with the disks you could erase and re-use them, but the cd's are a total waste and an environmental pollutant.

Finally some environmentalists got tired of a huge corporation polluting the environment with computer cd's. One of the more vocal organizations can be found at www.nomoreaolcds.com - an organization that is trying to collect a million unwanted AOL cd's world wide, and then make a quest to the AOL corporate headquarters with an armada of trucks, and dump the cd's in the parking lot.

So the next time you get an unwanted AOL cd in your mail - don't toss it - give it back.

For Raw Bytes, This is Frank Delaney