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CompuServe to struggle
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November 22, 1996: 2:13 p.m. ET
Analyst sees shift from consumer to business user as dubious move
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NEW YORK (CNNfn) - On the heels of posting its widest quarterly loss and shuttering its family-oriented Wow! online service, CompuServe Corp. announced plans this week to retreat from the online consumer market.
The company said Thursday it will expand its emphasis on corporate customers in the U.S. and Europe, trying to convert its 100,000 Wow! users to its core CompuServe Information Service.
Analysts said by making the move CompuServe was in effect ceding a large part of the consumer market to competitors. It had 3.3 million total subscribers as of Oct. 31, virtually unchanged from July 31.
"It's sort of sad. Just a couple of years ago, CompuServe was considered to be a hidden gem inside H&R Block's portfolio and they were still a titan in consumer online services business," said Adam Schoenfeld, an analyst at Jupiter Communications.
Speaking on CNNfn's "Before Hours," Schoenfeld said competitive pressures and a three-way battle for subscribers took its toll.
"CompuServe simply couldn't keep up with the subscriber acquisition wars that are being spearheaded by Microsoft and America Online," he said.
CompuServe pioneered the business user market before pursuing consumer users. Now company officials "just washed their hands of the whole ugly mess."
CompuServe, which is 80 percent-owned by H&R Block, provides online information, electronic mail and Internet access to more than 4 million subscribers in 140 countries.
The boom in business offerings on the Internet means CompuServe is racing to catch up in an already crowded field.
Schoenfeld said he doubts the No. 2 online service will "successfully focus on the business user after throwing all these resources after the consumer user.
"I'm not overly sanguine about their long-term prospects in the business user market," he said.
The business user is a valuable target in the short term, but with media companies such as Microsoft jumping into the burgeoning consumer market, CompuServe shifts away from an increasingly competitive area, Schoenfeld said.
"It really takes a nimble player, and I'd say Microsoft and AOL are those players right now."
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CompuServe
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