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LIFE ONLINE — AOL shifts strategy |
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Written by asap
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Thursday, 03 August 2006 |
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Mark Lennihan/Associated Press
Stepping up the chase for online advertising dollars, AOL will give away e-mail accounts and software now available only to its paying customers in a strategy shift likely to accelerate the decline in its core Internet access business. The decision, announced Wednesday Aug. 2, 2006 by AOL parent Time Warner Inc., removes the few remaining reasons for AOL subscribers to keep paying when they already have high-speed Internet access through a cable or phone company. |
AOL’s “You’ve Got Mail” tag line was once so familiar -- and evocative -- it was even a movie title. But a latter-day Meg Ryan and Tom Hanks wouldn’t need the quintessential online company to connect, now would they?
From Yahoo! to Gmail on to YouTube and MySpace, the online world is chock full of the sorts of services that AOL built its business on through the go-go ’90s.
So now AOL, the Internet behemoth that let millions use e-mail for the first time, has announced it is offering its e-mail accounts and software for free and will shift its efforts to chasing advertising dollars like everyone else.
What a difference a decade makes. You don’t have to be old in America to feel the passing of an era.
“AOL is a legacy company,” says Jennifer Simpson, an analyst at the Yankee Group in Boston. “When people were starting out on the Internet, the skill level maybe wasn’t there,” she says. AOL had “a great insight into the industry to provide you not only with access but also with services, connecting you to your colleagues, allowing you easy access to certain content.”
Even now, AOL has 17.7 million U.S. subscribers -- though that’s a 34 percent drop from its peak in September 2002.
Going forward, “the question is can they re-create this user base,” says David Card, a senior analyst at Jupiter Research.
AOL’s millions are what attract advertisers. “Will those users use multiple properties? Or will they just use e-mail or just use instant messaging? Will they actually go to AOL Music and AOL Video?” he says. “They need to get people to use the application, and they also need to create that network and drive traffic across their different properties.”
But as the online world becomes more compartmentalized and do-it-yourself, the larger question remains: Can big companies consistently make money off the freewheeling World Wide Web?
“It’s a very interesting quandary,” Simpson says. “We’re at a point in the market where a lot of the boundaries and the moneymaking opportunities and business models for how the Internet is going to be successful haven’t been completely worked out yet.”
The challenge, as always, is to figure out what’s next. After all, it’s only a matter of time before MySpace is the theme of a big-budget Hollywood movie.
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Stephanie Hoo is asap’s business writer.
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