Back to the future

After years of trying to break into the consumer market, CompuServe read the writing on the wall.

Last week it killed Wow, a service geared toward mainstream and family consumers. The original online service also declared that it will no longer spend big bucks trying to get new mainstream customers. Instead, the company will refocus on its original mission: serving business, technical, and professional users.

Not all has been lost. Even in its new--or old--incarnation, CompuServe will continue to operate forums that have developed a loyal following that could wind up being the service's biggest strength, said Mark Mooradian, an analyst with Jupiter Communications. And lest anyone forget, CompuServe is still the second-largest online service behind AOL, with 5 million subscribers worldwide.

But the question for the future is whether the company simply lost too much ground while spending so much time, energy, and money trying to draw general users.

CompuServe has posted loses for the last three quarters. It has drastically slashed its marketing budget as top managers have quit the company and subscribers have left the service.

The trouble became painfully obvious at the end of August when parent company H&R Block decided that CompuServe (CSRV) was losing too much money to sell its stock. H&R Block, which had owned CompuServe outright had already sold 20 percent of the stock and planned to spin off the remaining shares, but it delayed that move because poor earnings had lowered its market value.

At the same time, CompuServe was still trying to tout itself as a mainstream online service, saying it was reinventing itself as a place where families would feel just as comfortable as hard-core techies. The goal was to compete with other entertainment media, such as television.

That plan, obviously, never got off the ground. Wow, which officially goes off line January 31, had only 102,000 members--just a tiny percentage of the online services market.

AOL stands to gain new members with CompuServe's retreat, and other competitors are waiting in the wings. Disney, for example, is planning a new online service aimed at families and children, and CompuServe's exit could help create an opening in that area.

In general, said Gary Arlen of Arlen Communications, "There's potentially room for outsiders to show up." 

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