AOL 8.0 (Home Networking 101)

AOL’s latest service, version 8.0, soars into the media universe during a splashy launch Tuesday. The event carries the hopes of a
beaten-up ISP trying to find new revenue and grow its broadband base.

The centerpiece is singer Alanis Morissette, who will
perform at New York City’s Lincoln Center as close to 2,000 AOL members fan out to tell anyone who will listen about the new features in 8.0. Comedian Dana Carvey is also expected to perform.

For a product AOL Chief Executive Jonathan Miller calls “the most
important launch” in the company’s history, the 8.0 stakes are high
enough. Revenues from advertising and e-commerce have plummeted about 42 percent from the last year at the flagship ISP. One of Miller’s many
mandates is to find new ways to squeeze out sales. On Tuesday, the
curtain rises on the response.

Behind 8.0’s new features, such as call messaging for dial-up users and
exclusive “first look” music performances for broadband subscribers, is a blueprint for AOL’s approach to finding new revenue.

The release has also become a kind of starter kit for a promised menu of premium services, much as cable subscribers pick up incremental revenue by offering basic or premium packages.

But so far, the biggest new premium pitch in 8.0 is aimed at dial-up users. Call Alert is a service that lets subscribers know when
someone’s trying to call while they’re online. It serves a pre-recorded reply, such as “I’m online right now, try me on my cell, or send me an Instant Message.”

Call Alert costs an extra $3.95 a month (after a two-month promotion in which members pay an introductory $1.95 a month). That’s on top of a monthly fee subscribers may have to pay to their phone providers for call forwarding, which ranges around $5 per month.

Otherwise, the new content in AOL 8.0 is bundled. Taking a cue from television-style programming, AOL will be introducing a number of video series designed to bring the concept of appointment viewing online. It plans over 45 new online shows that run throughout the week, with an emphasis on news-style programs early in the week and more entertainment as the end of the week approaches.

The types of programs depend on which of six personalized “welcome screens” subscribers choose to greet them as they start each AOL session. A lot also depends on whether the subscriber is on a broadband or narrowband connection. The new programming is geared toward a broadband connection.

Some screens will offer more news, others more video entertainment. AOL will offer the screens to advertisers as targeted audiences.

AOL Broadband, Home Networking 101

AOL’s heavily branded broadband service in 8.0 is more than an integral part of its day-part programming strategy. Broadband is the key to AOL’s Home Networking service, which AOL hopes will grow broadband users while hanging onto dial-up subscribers that still bring in most of the profit margins.

A key aspect of the home networking service is the Multiple Simultaneous Login feature, which is free to members who sign up for the AOL Broadband service and keep a dial-up access plan. The multiple login feature allows up to seven screen names on a single AOL Broadband connection, as long as there’s also a dial-up connection in the house.

The home networking service is relying on content to first compel an interest in AOL Broadband. That’s why AOL’s beefed-up music channel, which houses the popular “[email protected]” service, plans even more exclusives for broadband subscribers’ “first looks” at upcoming music releases and performances. In addition, an improved [email protected] will offer what company officials call “CD quality” tracks and programming.

Another component of the home networking strategy is a new feature
called AOL Companion, a little window that remains on the desktop of an always-on broadband connection (it’s a feature on the dial-up
service, too).

The Companion is the user’s one-click shortcut to e-mail, music
services, Instant Messaging and “information snacking” features such as weather, news and search engines. As the companion “follows” a user around, it becomes a “touch point” for an ongoing AOL “session” built on an always-on experience more so than counting page views.

But whether advertisers will want to buy broadcast-style slots of time in the broadband service instead of being served up with page views remains an open question, since much of the day-part programming has yet to debut.

Still, AOL’s Miller calls the service “a revolution for online families, and an important step in our overall broadband strategy. Multiple Simultaneous Login ensures that family members don’t have to fight over who goes online — and the great broadband features of AOL 8.0 really make getting online worth fighting over.”

Balancing Broadband

The 8.0 release represents a tricky balancing act for AOL. It seeks to improve the experience of its dial-up subscribers and find new incremental revenues from premium services. At the same time, it has to steal other ISPs potential broadband subscribers in order to avoid eating into its more profitable dial-up base.

AOL currently counts about four million broadband subscribers out of its 35 million-subscription base. About two million are through its own network service, Road Runner, which is offered through the Time Warner Cable subsidiary of corporate parent AOL Time Warner .

Because of the higher costs involved with access fees in order to offer broadband through other carriers, AOL has to drive higher revenue through premium services if AOL Broadband is going to be the profitability savior AOL wants it to be, notes Merrill Lynch media analyst Jessica Reif Cohen.

And without incremental revenues from premium services, she says, broadband is not as attractive a cash generator for the company as dial-up service ($9.66 per broadband subscriber each month compared to $13.04 per dial-up subscriber).

And yet, most of the new content in the AOL 8.0 release is bundled as part of a broadband or narrowband package, says Jupiter Research Internet analyst David Card. (Jupiter Research and this publication are owned by the same parent company, Jupitermedia Corp.)

He says neither AOL nor its archrival Microsoft, which is gearing up to launch its own 8.0 ISP service this month, has aggressively launched a game or music service yet, no new exclusive content, says Card.

Both AOL and Microsoft’s upcoming 8.0 releases “raise the bar” with improved features, “but I don’t think either one is enough to jump start the market, or to steal market share from the other.”

Other new features in 8.0 include:

* Enhanced parental controls;

* Color-coded e-mails that designate which are from known senders,
unknown senders, and known spammers;

* MatchChat, an interactive database (dubbed the “flirting database” by AOL staffers) that lets users search on relevant topics and connect with real-time chats based on search results;

* Music Share, which lets IM users play DJ with each other by sending music sample file links to s to buddy lists. The feature is part of the beefed-up Music Channel;

* More “emoticons” to choose from, with corresponding audio.

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