South-Western - Management  
America Online Will Put Down Its Pop-Up Ads
Topic Strategy
Key Words AOL, pop-ups, strategy
News Story

America Online is listening to consumers and getting rid of their pet peeve - pop up ads. The move is part of AOL's campaign to revitalize its online service after years of neglect. AOL is facing increased competition from Microsoft, Yahoo, and high-speed Internet providers, as well as internal pressure to increase profits.

AOL began selling pop-up ads in 1995. The ads are the first thing subscribers see when they log on and the last thing they see when they log off. Abandoning these ads will cost AOL about $30 million, but the company hopes to make up the difference in profits by selling more targeted advertising. AOL is not yet following the lead of EarthLink, which allows its subscribers to block nearly all pop-ups. Consumers rank only telemarketing as more distracting and less desirable among ad mediums. This is in spite of the fact that only 9.2% of Internet advertisers use pop-ups.

Some advertisers are worried that AOL's decision might have a ripple effect in the industry, causing advertisers to go back to the much-maligned banner ads. Microsoft's MSN Internet service and Yahoo are continuing to use pop-ups on a limited basis.

Questions
1.

AOL decided they need to make a strategic change in their advertising policy. Why did AOL make the decision to eliminate pop-up ads? Who will benefit from this strategy?

2.

The article states that the company has neglected its online service for years. Is this an example of competitive inertia? Explain.

Source "America Online Will Put Down Its Pop-Up Ads," Wall Street Journal October 16, 2002, p. B1.
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