AOL For Free?

AOL is reportedly considering offering its online services for free
to some of its users.

After years of watching subscribers depart at an ever-increasing
rate, AOL is considering dropping the subscription business model and
re-focusing on advertising revenue, the Wall Street Journal reported
today, citing people familiar with the matter.

AOL CEO Jonathan Miller presented the proposal to parent
company Time Warner’s executives in New York last week.

AOL refused to comment on the report.

In the plan,
AOL would stop charging subscription fees for its services to
broadband users or those who dial-up using another ISP.

The hope would be that users would take AOL up on its offer and use
its portal services enough to lure advertisers into making up the
lost revenue.

It’s perhaps not so surprising a move from a company such as Time
Warner, which has long depended on advertising in its publishing

AOL has already been losing subscribers for years now. Lately the
rate has only been increasing. In March, AOL reported 18.6 million
subscribers, down from a 26.7 million in 2002.

In January, AOL attempted to slow the subscriber departures by partnering with Bell South, Verizon and Time Warner Cable to offer broadband services as low as $29.90.

The company also told in May that it partnered with wireless carrier Clearwire to roll out a broadband service in the hopes of holding onto its dialup customers, as they migrate to broadband.

But subscriber numbers continued to fall and in the same month, AOL cut 1,300 subscriber-servicing call center jobs.

Cutting the subscription business entirely would allow AOL to severely
pare down its costs, though at the loss of its subscription revenue, which was a reported $1.5 billion in the first quarter of this year.

But AOL earned $392 million selling advertising in the first quarter this year.

And while $1.5 billion may seem to be a lot, the success of Google
has shown that advertising-dependent revenues can be very robust.

Time Warner has also undoubtedly seen that Internet advertising
increase 30 percent last year.

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