America Online built itself into the most potent force in
cyberspace largely by appealing to families with chatty teen-agers
who want to flirt online and adults looking for an easy way to send
electronic mail while checking the weather and sports scores.
Now, the company has to get serious if it is to win the hearts
minds of corporate executives in pin-stripe suits.
Nearly lost in the complexity of America Online's deal to buy
Netscape Communication is America Online's announcement that it will
enter an entirely new market: working behind the computer screen to
help companies open and operate online stores.
Netscape already has created software that made it a player in
providing support for what is already known as electronic commerce.
But America Online now says it has ambitions to offer a much wider
array of software, consulting and services for online merchants.
"Most companies that sell to consumers realize that they need to
get into the e-commerce space," said America Online President Robert
Pittman. "We see a major business in offering them an end-to-end
The market is big and growing bigger by the day. Forrester
Research estimates that $325 million will be spent this year on
electronic commerce software and another $5.3 billion on services
that range from graphic design to the turn-key operation of entire
online stores. By 2002, Forrester estimates, the combined market for
electronic commerce services and software should top $35 billion.
"E-commerce services are the silver bullet that will enable
companies to be able to take advantage of the true business
opportunities on the Web," said Traci Gere, an analyst at
International Data. "The market is growing very rapidly, but it is
Analysts say the leader today in e-commerce services is IBM, which
has a full line of offerings from sophisticated software products to
Other competitors include well-known information technology
consulting companies such as Andersen Consulting, the spinoff from
the Arthur Andersen accounting firm; Electronic Data Systems, which
runs computer systems for big companies, and PricewaterhouseCoopers,
which offers accounting and consulting separately but under one
umbrella. Software companies like Microsoft and Netscape sell
packaged programs, typically with little or no consulting to help
customers use them.
There are also plenty of new companies that have sprouted up to
provide electronic commerce services. Some, like Agency.Com and
Organic Online, started basically as advertising and design firms.
Others, including U S Web and Viant, have emphasized programming and
consulting. In fact, those two strains are blurring together, as
exemplified by U S Web's pending merger with CKS Group.
America Online argues that its advantage in this increasingly
crowded bazaar is its ability to combine a broad subscriber base of
about 15 million customers with Netscape software, plus hardware
Sun Microsystems, which has joined in America Online's venture into
electronic commerce engineering.
"This is the first time anyone has put a true end-to-end solution
that starts with the silicon and ends with the audience," said Barry
Schuler, America Online's president for interactive services. "We
start with Sun's line of servers, then the commerce tools to build a
store, the support services to process orders and then a deal for
online real estate that can drive the traffic."
Despite the advantages Netscape and Sun bring, analysts say that
America Online faces a variety of problems in its new quest.
Chief among them is whether it can appear to have the consistency,
focus and follow-through that corporate customers demand.
"AOL is not the first company that comes to my mind when it comes
to business-quality software," said Robert Chatham, a senior analyst
with Forrester Research.
Its decision to keep Netscape as a separate unit and offer
electronic commerce services in partnership with Sun will not
its credibility, Chatham said. …