New Products Boost AOL’s Resolve

As America Online employees burn the midnight oil before the release of AOL v. 8.0 and tweak an upcoming discount shopping service, a renewed sense of resolve is taking hold at the ISP.

After a year of enduring tribulations — including plummeting advertising revenues, shareholders outraged over AOL’s slumping price, regulatory probes of its accounting, and management shake-ups — a “take back the company” movement is afoot at AOL.

Company officials say the sense of esprit de corps goes beyond the energy building before the release of AOL 8.0, slated for Oct. 15th at a splashy New York
venue. They say morale is up because of excitement about new products
waiting to launch on the heels of version 8.0.

For example, a new discount shopping service for members, that will help
small and medium e-tailing vendors liquidate excess inventory will go live early next year, according to a source close to the company.

As commercial vendors increasingly list liquidation items on eBay, AOL is apparently moving to get a piece of those new sales by leveraging the size of its 34-plus million audience.

The new feature could help revitalize AOL’s own slumping ad revenues with an eBay-style cut of each sale the service facilitates. Most of AOL’s e-commerce revenues are gleaned from charging vendors “rent” to come onto the AOL “mall” and have suffered the most in the advertising recession of the past two years.

In the most recent quarter, for example, AOL’s advertising and commerce revenues fell by 42 percent from the year before to $412 million. AOL recently said it expects full-year advertising and commerce revenues (which make up about a third of total sales) to dip by about 5 percent to $1.7 billion.

The new discount shopping service would be threaded throughout different “touch points” of AOL instead of at a destination site, the source said. Discounts might range from 30 percent to 50 percent on retail items and would be an extension of the popular “deal of the day” service in AOL’s shopping channel.

An AOL spokesman declined to comment on the e-commerce plans.

Although the service is not designed to compete with eBay, AOL’s
long-time e-commerce partner, the move does send a signal from AOL to the marketplace: Members rule.

The phrase, suggesting that its subscriber base gives the ISP
some weight to throw around, has become a kind of mantra around the
halls of AOL, the ISP’s new chief executive said this week.

Speaking at the Internet World trade show in New York, Jonathan Miller said rank and file employees had begun putting signs up around AOL headquarters that say “members rule.” Miller said “we’re taking the company back, back for our members” as he outlined plans for getting AOL back to profitability.

The company is looking for new areas of commerce, he said, and will be for some time to come as it rolls out new products for a mix of dial-up or broadband connection speeds.

“The extent of that challenge is why we have our innovation labs humming again,” Miller said. That’s “why we are reviewing new programming concepts every day, that’s why we’re challenging our people to stretch creatively and ask themselves one question: what do members want.”

As such, look for new ways to buy tickets online with, and new ways to find personals through a partnership with online personals service Match and Ticketmaster are part of USA Interactive’s e-commerce assets, which Miller headed up before joining AOL last August.

The new AOL 8.0 will be setting the stage for those e-commerce
opportunities, he said, especially for broadband users who “snack” on
information — using an always-on connection to grab bits of information throughout the day.

The new shopping services are but one leg of a
four-pronged strategy to revitalize AOL that its founder, and chairman of AOL Time Warner, Steve Case, outlined to investors at a media conference this week.

One, Case said, is to rethink AOL’s approach to advertising and ecommerce. Other areas include driving continued profitable growth for the core narrowband service; developing a compelling broadband product and business, and managing AOL’s international business to achieve profitability.

“I think we lost some of our focus for serving members in the last few
years,” Case told investors. “The good news is that focus and that passion
is back.”

Miller called the movement “a very clear, new direction” for AOL, “one
that is member focused and getting back to the heart of what built this company.”

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