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AOL hits 1 million abroad

The No. 1 online service in the United States reaches the 1-million mark overseas, with 80 percent in Europe.

America Online (AOL) today announced it has reached what it considers a major milestone: it now has 1 million members outside the United States.

After racing with former competitor and soon-to-be subsidiary CompuServe for American domination overseas, AOL can now say that with 1 million overseas members, at least 80 percent of which are in Europe, it has reached some sort of critical mass. (The numbers do not include CompuServe customers.)

While it took AOL nine years to hit its million marker in the United States, it took only two years to do so in Europe, said Rich D'Amato, an AOL spokesman.

"I think it shows the birth of the growth of the international mass medium," he said.

Broken down by country, AOL has 400,000 members in Germany; 300,000 in the United Kingdom; and 100,000 each in Canada and France. D'Amato would not disclose numbers for Japan; however, based on the other numbers given, there could be up to 100,000 members there, depending on how AOL rounded off numbers in other countries.

AOL's strategy has been to export its American product with a heavy push for localization. All products are marketed and created locally. In AOL's next software upgrade, due to be rolled out starting this month, all except the Japanese system will be available to all members. D'Amato said the rapid growth overseas proves that strategy has been working.

Emily Green, an analyst with Forrester Research, said she is impressed by how rapidly AOL has been able to build its overseas market. But how AOL leverages those eyeballs remains to be seen.

In the United States, where advertisers use the Net to reach out to customers across the country, having big membership numbers helps AOL sell more ads.

Overseas, however, AOL faces some obstacles when it comes to selling ads: Overseas markets have not embraced Internet advertising by any stretch, Green said. And because individual markets are so small and diverse, most don't have a desire to reach across several countries or even the world to get out their message, Green said.

"A pair of eyeballs in Europe is not as valuable as a pair in the U.S., " she said.

But when it comes to commerce--another important revenue stream for AOL--that might prove to be a different story. If companies can extend their markets to overseas partners, they probably will be happy to do so, Green said.

While Green also praised AOL's quick ascent in the overseas markets, she added that there are some uphill battles when it comes to gaining more customers. For one, most phone systems charge by the minute, which means overseas customers are less likely to spend a lot of time online.

In Japan, AOL has been having trouble making headway. While numbers there are 100,000 at best, the two leading providers in Japan have 2 million members and are gaining European customers.

But all in all, the news is good for a company that bases its growth on how big it can build its audience for its partners.

"The significance here is the global number," D'Amato said. "That means you can begin to talk with advertisers and you can begin to explore areas of electronic commerce. We see that as part of the future. But it's reaching the critical mass that allows you to sell the service like we've been doing in the U.S."

Separately, AOL today announced that it has reached an agreement with online auction site eBay to offer the service to AOL members.