AOL plans to give away their service to high- speed Internet users in a bid to improve its online advertising business, the company announced today.
AOL had up offered its e-mail accounts only to its 24 million subscription paying customers, says C/Net. But AOL has lost 9 million U.S. subscribers in four years, mainly to broadband rivals.
To keep subscribers and lure advertisers, it has been adding content such as news and music. The additional eyeballs are expected to boost ad revenues, compensating for the loss in subscription revenues.
“We’ll now be able to maintain and deepen our relationship with many more members who are likely to migrate to broadband,” AOL Chairman and Chief Executive Officer Jonathan Miller said.
Since 2005 Time Warner has openly pursued a strategy of developing free-access programs on AOL — such as TV series, news and music — to compete with Yahoo! and Google.
Still, the lion’s share of Web video watchers have flocked to YouTube.com (31.2 percent market share) and News Corp.’s MySpace.com (second with 17.61 percent share), in the week ending July 22, according to HitWise. Microsoft upgraded their Spaces blogging service, a MySpace clone, Tuesday. Microsoft’s Live Spaces features blogs, photo albums, and music lists.
AOL Video, launching August 4th, aims to be the one-stop shop for online videos and will let users search for videos across the Web, upload their own, or buy or watch for free thousands of TV shows from any one of 45 video-on-demand channels on nearly any device.
Om Malik calls Time Warner The Frankenstein of Online Video - “Each division doing its own thing, with its own partner”.
Chief Executive Officer Richard Parsons of Time Warner, the world’s largest media company and parent of AOL, and AOL President Jeff Bewkes, who hatched the plan, are betting customers will keep on using AOL e-mail and visit the AOL.com. AOL has been a drag on Time Warner’s earnings for five years.
“It’s a risky gamble,” said Laura Martin, an analyst at Soleil Securities Group. “AOL is giving up a definite cash flow stream from existing subscribers in hope it will replace the cash flow with advertising revenue,” Martin said.
Giving away AOL would reduce revenue by about $2 billion, but it increases eyeballs and ad revenue, says the Washington Post. AOL saw advertising revenue rise 26 percent to $392 million in the first quarter of 2006.
AOL will continue to offer its dial-up access subscription service, but will no longer aggressively market it. Members may continue to subscribe to AOL?s unlimited premium dial-up plan with a monthly price of $25.90 (including such additional features as 50 gigabytes of storage and unlimited premium customer care) or choose from two lower-cost access plans.
Cable operators Comcast, Time Warner, Cox Communications and Advance/Newhouse announced a $200 million joint venture with Sprint, in November. The wireless strategy will tie cellphone users into cable properties.
Free services in a bundle seems to be a trend. Related DailyWireless articles include; UK: Free For All, BSkyB: Free Broadband, Murdoch to Offer Free Broadband?, AT&T + MetroFi, WiFi Ad Nets and The New State Television.
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