A Few ‘To Dos’ For AOL

How does the once-mighty AOL become mighty again? By becoming free.

And we mean more than switching to an ad-supported model of free content and services that it announced this week.

That much has been an open secret in the industry for months now, given the inexorable slide of its dial-up subscription revenues, as more users defect to a broadband service AOL is not equipped to offer directly.

Even the announcement of 5,000 layoffs to help cut costs as it makes the switch is no surprise. (AOL now counts about 17.7 million dial-up users, down about 3.1 million from the same time last year. Overall, it’s lost about 37 percent of its dial-up base since its peak of close to 27 million in early 2000.)

If AOL really wants to shake things up, change course and burnish its image as a media player in the evolving Web, it needs to be truly free of its corporate owner, Time Warner.

Six years after its fiasco of a marriage to the world’s largest media company, AOL needs to cast off and put that sorry story — the carping over the deal by Time Warner execs, culture clashes, the back-biting — behind it. Both sides do. Sail on, before a following sea rocks the boat anymore.

Sure, AOL’s move to become a Yahoo-like portal play with ad-supported content makes that proposition a little tricky. After all, Time Warner is supplying a chunk of that content AOL is offering in return for viewing an ad.

Plus, it’s not as if the ISP division is hurting the bottom line of Time Warner all that much either, despite AOL’s dial-up slide.

AOL has contributed well over a billion in profits for Time Warner since their merger. The latest earnings results from Time Warner are a similar story. AOL revenues declined 2 percent to $2 billion as a result of sliding subscription revenues.

But as usual, advertising revenues were strong, jumping by 40 percent (or $129 million) since the same time last year.

Time Warner is all too happy to have AOL’s contribution to its bottom line. And this time, AOL could use some support in return as it weans itself from dial-up revenues and embraces more ad dollars. But it also has other potential partners it would be much happier with.

Until that day comes — whether it’s by way of a sale to Google, Microsoft’s MSN or even a spin-out altogether — the once-mighty AOL’s pace of innovation is doomed to suffocate under one of the most insecure, lumbering media companies on the planet.

With online ads booming and video over the Web exploding, AOL is in a strong position to leverage its brand for a leadership role on the Web.

Its ad base is robust and capitalizing on the hot online ad market right now. So the move to build up its traffic with more content makes perfect sense.

That’s what makes AOL’s deal with search king Google, which holds a 5 percent stake in AOL, so intriguing.

Between Google’s need to expand its ad inventory and AOL’s interest in beefing up its search offerings, especially with video, the two could be a nice fit. And we all know how Microsoft is keen on its Web services strategy.

Plus, did we mention that both Google and MSN are Internet-focused companies? It makes a huge difference.

AOL may not be bleeding edge with its rollouts, but it hasn’t been missing in action, either. It is leveraging its Netscape assets by offering a user-voting news site similar to the wildly successful Digg.com.

It just launched a video service beta via AOL Video, a play similar to YouTube.com, another runaway success in the land of user-generated content. It’s already rolled out In2TV, which uses old television shows from the Time Warner archives for on demand videos.

Its Instant Messaging group recently launched a well-received beta called AIM Pro that is winning over plenty of converts with its Web conference features and integration with Outlook calendar.

AOL’s Voice over IP offerings are moving forward with its Triton IM bundle, and it’s positioned for video over IM and improved video chat when the market timing is right.

AOL’s dial-up business may be sliding, but it’s not going to die off that soon.

Before you declare dial-up over, take a trip to some of the rural pockets of the U.S. and then see how easy it is to get a DSL or even cable modem for broadband.

It would be silly to dismiss AOL as just another Web has-been, even if an AOL.com address was once an advertisement for somebody with not a lot of tech savvy. AOL has a strong brand name and a strong operating history that is already winning over a new generation of converts.

The once and future Web powerhouse could be an even bigger influence, in my view, only after it leaves behind a bad cultural fit it hooked up with back when everyone was drunk with irrational exuberance.

When that happens, that’s the day I will call AOL truly free.

Erin Joyce is executive editor of internet.com’s news channel

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