The wireless implications of America Online Inc.’s acquisition of Netscape Communications Corp. and its related strategic alliance with Sun Microsystems Inc. continue to reverberate as more attention has been given to the possible role paging carrier Metrocall Inc. may play in AOL’s long-term strategy.
On July 17, Metrocall and AOL entered into an interactive marketing arrangement that called for AOL to promote and sell Metrocall’s services through an exclusive online campaign and e-commerce site, which AOL began doing last week by adding Metrocall links to its member home page as well as to its Web site. Additionally, Metrocall launched a new Web site Monday, featuring an online store of its own.
At the time, the marketing agreement seemed to have little benefit past giving Metrocall another distribution channel. But according to a Yankee Group update written by analyst Darryl Sterling, Metrocall’s foray into two-way paging through its recently announced partnership with PageMart Wireless Inc. changes the landscape dramatically.
“Metrocall will surely be a prime candidate for any type of wireless advertising and e-commerce experimentation in AOL’s imagination,” read the update.
Executives at Metrocall said the speculation was accurate.
“We definitely look at the current relationship as an absolute launch pad,” said Mike Scanlon, senior vice president of sales and marketing at Metrocall. “We have spent a great deal of time focusing on the future of the Internet.”
“That’s certainly a plan of ours in the future,” added Tom Matthews, senior vice president of corporate and business development at Metrocall. He said AOL’s “AOL Anywhere” strategy includes extending AOL services to wireless devices, and he hopes Metrocall’s relationship with the company will extend to that effort in the future.
For its part, AOL has vast aspirations for all sorts of “e-commerce experimentation.”
“The development of e-commerce is entering an exciting new stage,” said Steve Case, AOL chairman and chief executive officer. “Netscape’s highly regarded suite of e-commerce software, coupled with our strategic alliance with Sun, will help us drive e-commerce to a whole new level that will benefit both business partners and Internet consumers.”
Metrocall’s addition of two-way services is particularly notable because it could allow AOL eventually to extend e-commerce solutions to wireless customers. Analysts foresee such applications as paging users querying the Internet for a specific product and ordering it, all from the pager, much like what is done from the desktop now. Going further, it could allow AOL’s business partners to send advertisements to paging subscribers, the users of which could respond by purchasing the product immediately from a two-way device.
The possibilities are many, Sterling said, mainly because both the paging industry and the Internet industry see e-commerce as a possible solution to a shared problem.
“The point here is both the Internet and the paging industry have the same problems … there’s only so many subscribers they can get and only so much they can charge for monthly access,” he told RCR.
As such, both must find alternative revenue streams, and e-commerce is one option.
“As these industries have evolved, service providers have been scratching their heads about how to change their business models to generate alternative revenue streams, in this case from advertising and e-commerce, in addition to basic service revenues. Now they have an end-to-end Internet solution to achieve the goal,” wrote Sterling.
Additionally, e-commerce is a solution that appeals to a growing demographic of paging services-consumers.
“The AOL-Metrocall deal addresses wireless messaging possibilities, not from the business place, but from the consumer market in the form of Netscape’s e-commerce capabilities,” Sterling said.
In other words, e-mail is the Internet application that most attracts business users to paging service. E-commerce could become the Internet application that most attracts consumer users to paging service.
And because virtually every partner bringing the e-commerce solution to the consumer wins, it shouldn’t be too difficult to convince all involved to find a common solution. The retailer benefits from a cheaper method of distribution, AOL benefits from the retailer paying to advertise products and the paging carrier can provide value-added services to subscribers and realize alternative revenue streams from advertising on its network.
“The value chain in this is just so strong,” Sterling said.
This is important because there are several obstacles to meet before such a complete service is feasible. A popular e-commerce service would result in a large amount of data transmitted over paging networks, raising capacity concerns. Sun’s PersonalJava is considered less-than-optimal for wireless transmission and handheld devices. Finally, there are concerns that the wireless transmission model and the Internet model today are incompatible.
But Sterling said he believes the benefits are great enough to inspire both sides to find middle ground.
“This is a catalyst for both sides to take their business to the next level,” he said.
Metrocall, for one, said it plans to do the necessary footwork to make this possible.
“I think there’s a huge market potential, but it will take some time in developing,” Matthews said. He wouldn’t give a time line as to when he expects such services to be commercially available, but said the company hopes to have some success stories to tell “in the next couple of years.”
“I think the Internet companies see Metrocall as the company most interested in the Internet,” Scanlon said. “We’re sitting here in the new Silicon Valley of northern Virginia.”
Northern Virginia is to the Internet industry what northern California is to the computer industry. In fact, some call the region “Internet Alley.” It is where the Pentagon is based, the entity that created the Internet, as well as where AOL is based. “We all know each other in this community,” Scanlon said.
