In today’s day and age of almost frictionless customer acquisition, thanks to universal login systems like OpenID, Facebook Connect and Twitter authorization, it’s almost comical to look back a mere 10 to 20 years ago, and see what it took to get a new user to an online service.
Lalawag founder and VP of Online Marketing for MySpace wondered, though.
Steve Case, former AOL CEO, responded: “A lot! I don’t remember the total spending but do recall in the early 1990s our target was to spend 10% of lifetime revenue to get a new subscriber.”
According to AOL’s SEC filings from 1993 to 1996, the company spent around $400 million in “deferred subscriber acquisition costs.”
Steve further explained their methodology for setting the subscriber acquisition budget:
At that time I believe the average subscriber life was about 25 months and revenue was about $350 so we spent about $35 to acquire subscribers. As we were able to lower the cost of disks/trial/etc we were able to ramp up marketing.
“When we launched AOL 4.0 in 1998, AOL used all of the world-wide CD production for several weeks,” said Reggie Fairchild, who was product manager for AOL 4.0. “Think of that. Not a single music CD or Microsoft CD was produced during those weeks. I still remember hand delivering the Golden Master to Lisa in Marketing.”
The days of building a brand with that method of direct marketing are thankfully over, both for AOL, and the rest of us.
These days, AOL is perhaps best known for their endless string of acquisitions. Following the company’s rebrand as “Aol,” they’ve been buying up almost everything in sight. Our own Sarwat Jabeen reported last week on the acquisition string on news of their purchase of social profile company “About.me.”
This is the eighth acquisition by AOL in this year alone. Other acquisitions include pictela ( High definition video content providers for advertisments) , unblab (Email Prioritization App), TechCrunch (Technology blog) , Thing Labs (App Developers) and 5 min (Online Video Network), Studio Now(Online Video creation and management site), Rally up (Social Network). We think that by adding all this functionality to the Web Portal’s portfolio, AOL intends to cover some of the lost ground over the years. The success of these initiatives really depends on the smooth integration of these services within AOL’s overall strategy.
If Aol remains focused on media, and truly understands their present acquisitions, they have a real shot at building an unstoppable media powerhouse. Aol has a poor track record (under their former management when merged with Time-Warner) of understanding their acquisitions, and many bleeding edge technologies languished in obscurity for decades.
