These are uncertain times at CompuServe, Britain’s biggest consumer Internet access provider and number two in the US market.
A fortnight ago, chairman of the loss-making service Frank Salizzoni confirmed to US reporters that holding company H&R Block would consider any reasonable offers to buy the business. His comments were followed last week by reports that arch US rival AOL was considering a takeover of its competitor.
Meanwhile, in the UK rival LineOne, backed by News International and BT, launched an aggressive promotional campaign last week, centring around a three-month free access offer, through 1.6 million CD-Rom cover mounts on The Sunday Times.
But Martin Turner, UK general manager at CompuServe, is showing no signs of nerves as LineOne, AOL and Microsoft’s MSN have upped the marketing ante in an
effort to tackle CompuServe’s UK dominance.
Certainly marketing budgets have been hit at the UK company since a global retrenchment was implemented last year in response to business losses of over $100m (64.5m).
But CompuServe UK, unlike its US counterpart, remains a profitable business according to Turner, who is nonplussed by the clout of Murdoch and BT ranged against him.
“Murdoch’s content alone is not enough to create a compelling service. Internet users want multiple media services. LineOne faces a major challenge trying to encompass that.”
CompuServe, which claims over 400,000 paying UK subscribers, will be watching Murdoch and BT closely for any sign of anti-competitive practice – so far there is nothing to give grounds for complaint.
But, according to Turner, the problem for rivals lies not in winning short-term subscribers but in justifying spend by winning long-term customers. “It’s easy to give away free offers,” he says. “But it’s more difficult getting people to stay. They may try a service for one or two months and then cancel. It’s six months on you start recovering the cost of recruitment.”
Force of circumstance may have pushed CompuServe worldwide to adopt a more hard-nosed, short-term approach than its rivals to achieve profits among its UK subscribers But if CompuServe UK is a more selective advertiser, it is continuing to build its paid-for UK subscriber base as quickly as MSN, claims Turner.
If preventing churn among customers is key, CompuServe needs to shrug off its reputation for snail’s pace connection speeds. Turner insists it is trying.
Meanwhile, he is happy to face anything rivals new and old can throw at him. “We want to run a profitable business our way,” he says. “If that means we are not number one, so be it. But I can’t see our status as market leader being challenged for a long time, if at all.”