In a move to increase its online advertising revenue, AOL said on Wednesday it will make a range of its software and services free for internet users worldwide.
This is the latest move in AOL's ongoing transition to an ad-supported business model from its traditional subscription-based model. The company wants to bolster a healthy portal and an online advertising business built on content from parent company Time Warner. With this offer, AOL is hoping to attract new users, as well as retain a relationship with the subscribers who drop their AOL dial-up accounts.
"By giving AOL's valuable members the opportunity to stay with us free of charge as they shift to broadband, we will significantly accelerate AOL's transition to an advertiser-supported business model," Time Warner's chairman and CEO Dick Parsons said.
It's critical to retain former dial-up subscribers as AOL users, said Time Warner president and chief operating officer Jeff Bewkes. AOL members make up 36 per cent of US monthly unique visitors to the AOL network of sites and services, but they generate 80 per cent of the page views, he said. This means that they have a disproportionate positive effect on the consumption of AOL online ads.
Key to this deep engagement is their use of AOL's proprietary software, which subscribers lose access to when they cancel their dial-up accounts, Bewkes said. "We're fixing that problem. We're going to stop sending our members to our competitors," he said.
Although the company said in a statement that it would offer the freebies specifically only to broadband users, AOL representatives later clarified that dial-up users also qualify.
AOL also will stop aggressively marketing its dial-up business and will stop investing in trying to retain the less loyal, one-third of subscribers who have been members less than two years, said Jonathan Miller, AOL's chairman and CEO. This will help AOL save about $1 billion in operating expenses by the end of 2007, he said. "We are now at the point where we believe we can compete on the web at scale," Miller said.
AOL has retained the email addresses of users who discontinued the service over the last two years so they'll be able to reclaim them.
People have been cancelling their AOL subscriptions en masse in recent years. AOL ended its 2002 second quarter with 26.5 million subscribers in the US, but, four years later, that figure stood at 17.7 million in this year's second quarter, ended June 30. Advertising revenue, however, rose 40 per cent in this year's second quarter.