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AOL convenience beats content

Online content is "not the secret sauce," according to AOL executive Bob Pittman. Ease of use is.

NEW YORK--Not even a year ago, you could hear any number of America Online executives preaching the gospel of content, content, and more content.

What a difference not-even-a-year makes. "I don't think we're in the content business," Bob Pittman, chief executive officer America Online Networks, told several hundred attendees at the Jupiter Communications Consumer Online Services conference here this morning. "That's not the secret sauce."

Then is it chat? The service is so popular on AOL that the company said today that it will be putting ads in chat rooms. Or maybe it's email, which many call the "killer app" of the Net.

Nope. Not according to Pittman, who mentioned not once during his dynamic talk AOL's recent scandal with busy signals. "I don't think chat or email is the secret to driving the product," he said. "I think what we're selling is a service. What we're really offering people is convenience in a box."

Pittman said that what mainstream consumers--and they are the target audience these days--want is what AOL's got: convenience and ease of use. And despite of AOL's overcrowded network, despite its high rate of customer turnover, very few would argue that if AOL has nothing else, it has got the market cornered on the ease of use issue.

That's what will drive the online business in the next few years as it boils down to a few top players with big sites and the majority of ad revenues, Pittman said.

How does he know? Pittman starts from this premise: "Across all industries the consumer behaves exactly the same."

And Pittman, founder of MTV and former CEO of Century 21, says he's confident about some trends that he sees happening: First and foremost, consumers want convenience. They also trust brand names over unknowns. And while they won't put up with time-consuming searches on the Net, but they will put up with a lower-quality service if it's the most convenient.

"Consumers are looking to us to do all the work for them," he said. "The easier and simpler, the better."

Consumers also are loyal to a brand, he said, leading to his predictions of consolidation. While many others, including Jupiter's president, Gene DeRose, agree with him that the online business will consolidate, not all agree that the results will be the same.

Pittman is predicting that loyal consumers will be willing to pay more for online access in the future. Not surprisingly, Pete Higgins, group vice president for the Microsoft's Interactive Media Group, who spoke on a panel with Pittman after the keynote address, agreed. Both AOL and Microsoft's Microsoft Network charge $19.95 at present for unlimited access.

But fellow panelist Alfred Sikes, president of Hearst Media Group, disagreed. "I think access and subscription price is inexorably coming down. I think we're going to see more competition, a lot of downward pressure."

Neither is it easy to find agreement when it comes to the big unknown on the Net--just how companies will turn interactivity into money. Panelists, who also included representatives from Disney Online and News Corp., did agree with Pittman on another premise: Companies that want to make money online will have to depend on a variety of revenue streams, from subscriptions to commerce to advertising.

But small companies that think they can compete with the heavy hitters in the advertising arena have something else to learn, Pittman said.

Advertisers who want to get the biggest bang for their buck will increasingly and quite disproportionately go to the top players in the industry where they will be guaranteed the greatest number of viewers, Pittman said.

That's why AOL, with 8 million members--even if they're not a stable base of the same users--is in such a strong position, despite what anyone says about the company's recent problems, Pittman said.

As online analyst Cathleen Santosus said following the panel, "It's still much easier to use AOL than any other service. There aren't a lot of alternatives."

The question is, however, will AOL be able to achieve what Pittman calls true "critical mass," the point at which a company becomes such a major player that advertisers naturally flock to it?

And the answer? It will probably depend a lot on whether Pittman has made the right conclusions based on his consumer behavior hypothesis.

"It will be interesting to see if he's right or wrong," Santosus said. "Will interactively change the mentality of consumer behavior?" she asked. "If it doesn't," she added, "what's the point?"