Has AOL Outfoxed Microsoft?

What an incredible week for America Online.

In one 24-hour period, the number one online service provider announced major deals with retail giants Wal-Mart and Circuit City, which have about 4,200 brick-and-mortar locations between them.

On top of it all, AOL seems to have found its soul mate in Wal-Mart. Both companies are looked down upon by their competitors for doing business in a pedestrian and straight-forward manner, yet dominate their niches because of it.

An Overlooked Strategy

I distinctly remember when, a few years ago, a certain network television executive scoffed at the idea that the Internet would someday compete head-to-head with broadcast television. Of course, this shortsighted dismissal did not seem to deter AOL CEO Steve Case and his vision of a future where his company would do exactly that.

While others laughed, Case and Co. built a captive audience 20 million strong. Now, with this week’s deals, that number could double within 12 months.

Microsoft Playing Catch Up

The other reality that Case seemed to realize before anyone else is that online service providers would eventually become the computer operating systems of choice and the platforms for future e-commerce.

When the Internet began to explode, Microsoft’s belief in its Windows operating system seemed to blind it to this reality. Even though the company created a browser that has now become dominant, its software-centric vision prevented it from pumping more resources into building MSN’s subscriber base.

Consequently, even with Microsoft’s recent Radio Shack and Best Buy alliances, the company finds itself playing a dangerous game of catch-up with AOL.

Add that factor to a long-term struggle with the Justice Department, and you have a formula for disaster for Bill Gates and Company.

Role Reversal

Legend has it that Steve Case was once told that if he did not sell out to Microsoft, the software giant would take steps to drive AOL into the ground.

Obviously, Case did not sell, but it seems that Microsoft got its signals crossed and is now trying to drive itself into the ground.

What do you think? Let’s talk about it.

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