Takuya Nakayama pieced together the internal logic of this strategic combination.
"AOL has completely shifted its business focus," Takuya concluded. "Before, they treated their content channels as a cost for attracting users. Now, those channels have become shelves and ad slots."
"Exactly," Frank said, flipping to the last page of the report. "This is the chain reaction forced by the monthly subscription model. A Washington political outlet quoted American Banker: after implementing the monthly fee, AOL stopped sharing revenue with content providers based on user time spent. Instead, they started charging those providers exorbitant hosting and listing fees. Digital magazines like Slate, which were used to getting paid by AOL, are furious at this blatant extortion."
AOL's attitude toward content had undergone a fundamental shift.
They were no longer claiming to provide a public square.
They had become a shrewd real estate developer. Only those who could sell ad sponsorships, pay listing fees, and surrender absolute control over their displayed content could survive within the AOL ecosystem.
"Silicon Valley Online's free model and aggregated portal perfectly bypass all of AOL's charging points," Takuya summarized. "We don't pay them listing fees, and we're stealing the advertisers that should be theirs. That's why they're trying to erase us through algorithms and search rankings."
"They're building a new closed ecosystem," Frank said, his tone grave. "Steve Case wants to pen all American internet users within a $19.95 fence, where he decides what news they read and what products they buy."
Takuya Nakayama lifted his tea cup, still warm, and took a sip.
"Given the current situation," he said into the microphone, "we are actually in an unbeatable position."
On the other end of the line, Frank stopped flipping through the documents.
Tom pulled out his chair and shifted his posture.
"Boss, what do you mean?" Frank asked.
"What is AOL's specific market share in the pure ISP sector?" Takuya posed the question.
Frank recalled the research data he had on hand and gave an answer: "Preliminary investigations put it at roughly twenty to twenty-five percent. They're a massive player, and they've certainly captured a huge number of novice users with those ubiquitous trial CDs. But they're far from dominating the entire market."
"That's our point of entry," Takuya said, tapping his finger on the desk. "Twenty-five percent of the people are penned inside the wall, while the remaining seventy-five percent are outside. If AOL wants a closed ecosystem, we'll unite everyone outside the wall."
"Besides, Steve Case hasn't directly blocked access to Silicon Valley Online, has he?"
"He wouldn't dare," Tom chimed in. "Those antitrust lawyers in Washington are desperate for a big case to boost their track records. If he blocked a competitor's website outright, the Department of Justice would have a subpoena on his desk the next morning. All he can do is pull petty stunts like demoting our search rankings to annoy us."
"Since the channel is still open, we'll drive traffic in from other sources." Takuya Nakayama cut straight to the core of his plan. "Microsoft's IE 3.0 has already been bundled and pushed out with the new version of Windows 95. They recently released a toolkit called IEAK. Have you guys been paying attention to it?"
Frank, with his technical background, was quick to pick up on this.
"Internet Explorer Administration Kit," Frank recited the full name. "It's a tool Microsoft is using to win over ISPs and corporate users. It allows them to customize the IE Browser's default homepage, bookmarks, and even the interface icons. This thing is being discussed heavily in the developer community."
"Leverage this tool to its fullest extent," Takuya Nakayama commanded. "Silicon Valley Online's current rivals aren't just AOL, but EarthLink, Netcom, AT&T's broadband division, and hundreds of regional ISPs across the country. There are also PC manufacturers like Compaq, Dell, and HP."
Tom grasped the outline of this ambitious plan.
"We're going to buy the default entry points from these channels?" Tom asked.
"Not just buy—we can also trade resources," Takuya said. "Go negotiate with them. If they set go.com as the default home page in their customized versions of IE, or place it in the top row of the Favorites toolbar, Silicon Valley Online will provide them with exclusive content support or give them a shout-out on our portal. This is much cheaper for them than spending their own money to acquire users. Tell them: once AOL rolls out its monthly subscription model, the first ones to feel the pressure will be these honest ISPs who only provide access services. The enemy of my enemy is my friend. If we don't band together now, are we just waiting for AOL to crush us one by one?"
Frank scribbled notes rapidly on the other end of the line, the tip of his pen scratching against the paper.
"This is a massive plan," Frank said, pausing his pen to raise a critical point. "But it's impossible to bypass Microsoft. If we make too big a move through IE's customization channels, will Bill Gates intervene directly? After all, IE is their core weapon. When those Seattle guys get ruthless, they're no kinder than the bloodsuckers on Wall Street."
"Microsoft won't object," Takuya Nakayama judged, his tone certain. "Figure out who Microsoft's enemy is. It's Netscape. Marc Andreessen is spreading the word everywhere that the browser will become the new operating system. He's digging at the very roots of Windows. Bill Gates's mind is currently consumed with how to send Netscape to its grave. Microsoft's red lines for retaliation are two-fold: first, you can't compromise IE's stability; second, you can't touch the system shell integration—meaning, you can't create an alternative desktop."
Takuya paused, allowing the two men to digest the information.
"Silicon Valley Online will focus solely on content and services. We won't touch the underlying operating system, so we pose no threat to Windows," he continued. "As long as we keep our feature updates synchronized between Netscape and IE, Microsoft won't see us as a drag on IE's progress. As for helping Microsoft fight Netscape—there's no need for us to get involved. That's not a role that suits us. We should maintain a neutral public stance. Of course, we'll remain open to all forms of technical cooperation. Netscape is currently overwhelmed with integration tasks. With Microsoft's current development advantage, Bill Gates will be more than happy with a situation that looks fair and open on the surface but actually favors them. Why would he step in to stop us? He might even send us two crates of Washington State apples as a private thank-you."
Tom chuckled on the other end of the line.
"Using their own strength against them," Tom commented. "Borrowing Microsoft's knife to slice AOL's cake."
"Not only that, this is a perfect PR play," Frank's mind raced, uncovering another layer of value in this strategy. "We can proactively feed the media. We'll frame Silicon Valley Online's partnerships with major ISPs and PC OEMs as a landmark event in the fight against walled gardens and the defense of an open Internet."
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