Combined America Online/Compuserve would snare 50% of overall US business market, CI research shows.

LA JOLLA, Calif.--(BUSINESS WIRE)--April 9, 1997--

Merged Services Could Become Dominant ISP For Largest Businesses

America Online's possible acquisition of CompuServe makes a good deal of sense, particularly in the business marketplace, according to a recent study by Computer Intelligence (CI), the leading source of fact-based information for the computer and communications industries. CI's research indicates that the combined AOL and CompuServe share of the total U.S. ISP business marketplace of approximately 900,000 payrolled business locations would rise to 50 percent, as shown in the table below.

Overall Business Share of Market by ISPs

AOL 38% Local 38% CompuServe 12% Other 5% Prodigy  3% Government 2% Microsoft 2% Netcom 1%

Source: Consumer Intelligence Projected Installation Database, 1997

While AOL totally dominates the consumer Internet Service Provider (ISP) market, it currently shares the top position in the business market with local ISPs. CompuServe's traditional emphasis on serving the business community boosts it to the No. 2 position. Prodigy, Microsoft and Netcom also are significant players. Interestingly, CI found that government at all levels is a significant Internet access provider, with two percent of this market.

"While overall share of market is important, it is equally important to look at which ISPs dominate specific market segments," said Stan Schatt, CI's Research Director. "The Internet business marketplace is highly segmented, with ISPs focusing on distinct targets. AOL has been wildly successful as an ISP for very small businesses. CompuServe, on the other hand, has enjoyed more success with larger business locations. Some ISPs, such as Netcom and PSI-Net, have focused most of their energies on larger business locations."

ISPs' Distribution of Business Customers By Number of Site Employees

Number of Employees at Site

ISP 1-99 100+

AOL 98% 2% CompuServe 95% 5% PSI-Net 76% 24% Netcom 89% 11% Microsoft 95% 5%

Source: Consumer Intelligence Projected Installation Database, 1997

"Clearly, AOL's acquisition of CompuServe would have a serious impact on business-oriented ISPs such as PSI-Net and Netcom," Schatt continued, "and it would have an effect on Microsoft, which is also trying to grow its business customers."

As CI's research confirmed, not all business customers are the same. Attractive targets for ISPs are large locations that generate substantial value-added Internet charges. CI determined various ISPs' share of market at business sites with 1,000 or more employees (see table following). Many of these locations have chosen to use local ISPs for the moment, but most industry experts believe that major ISPs will soon begin a consolidation of the marketplace. AOL's interest in CompuServe could be an indicator that this trend is escalating.

"Our data reveals why CompuServe is such an attractive target, with seven percent of these large sites already in its possession," said Schatt. "Notice that despite AOL's massive difference in total number of customers, it has less than half as many of these large sites, compared to CompuServe."

Business Locations with 1,000 or More Employees by ISP

Local ISP 63% Government 8% CompuServe 7% Other 7% MCI  3% AOL 3% BBN  2% PSI-net 2% UUnet 2% Sprint 2% AT&T 1%

Source: Computer Intelligence Projected Installation Database, 1997

The attractiveness of a business to an ISP is based not only on size but also on the ways in which such a customer can be leveraged. A business with multiple locations, or a multiple-establishment enterprise (MUE), offers a chance to leverage a branch-office customer or headquarters site to add locations. A single-unit enterprise (SUE), on the other hand, cannot be leveraged to generate additional business. CI's research demonstrates that AOL's major strength has been with stand-alone or SUE locations, while more than half of all CompuServe's customers are found at MUEs (see table following).

Distribution of ISPs' Customers by Type of Locations

Multi-Unit Enterprise Single-Unit Enterprise AOL 27% 73% AT&T 53% 47% CompuServe 55% 45% Microsoft 28% 71% Netcom 62% 38% UUnet 81% 19% MCI 92% 8%

Source: Computer Intelligence Projected Installation Database, 1997

According to CI's Schatt, "It's clear that the ISPs that have focused on the business marketplace, and large businesses in particular, have much to fear from an AOL acquisition of CompuServe. Netcom and UUnet in particular seem vulnerable because of their dependence on large locations and enterprises with multiple locations."

Computer Intelligence, a Ziff-Davis company, is the leading source of fact-based information for the computer and communications industries. CI's extensive research capabilities provide a wide variety of products and services that help computer and communications companies sell and market more effectively. All of the company's products and services are based on proprietary information databases built and maintained by CI specialists. Headquartered in La Jolla, Computer Intelligence has offices in Cambridge, Mass.; Farmington and Norwalk, Conn.; Sunnyvale, Calif.; Dallas, Texas; and Europe. Samples of CI's extensive market data and research results, timely commentary from industry authorities and previews of upcoming technology events are available on the company's site on the World Wide Web, http://www.ci.zd.com .

Ziff-Davis, Inc., a Softbank company, is the leading provider of special-interest content about the Internet and computing. The quality and quantity of this content attract the largest and most powerful audience of early adopters and opinion leaders in both the business and consumer markets. Ziff-Davis enables advertisers to reach this audience effectively and efficiently through an integrated system of print, online and broadcast media.

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