Wednesday, August 02, 2006

AOL Software for Free

In an Amazing strategy shift, TW will start offering the AOL software for free. "Stepping up the chase for online advertising dollars, AOL will give away e-mail accounts and software previously available only to its paying customers in a strategy shift likely to accelerate the decline in its core Internet access business." AOL is worried that Yahoo!, Google and Microsoft (as well as many Social Media sites like MySpace and YouTube) are taking too many of its users. Interesting quotes:
  1. "AOL has about 6.2 million U.S. subscribers who have broadband but pay extra — generally $15 a month — for AOL services, meaning AOL could lose more than $1 billion in annual revenue from those customers alone. Executives believe they can find that amount in savings by the end of 2007 by cutting marketing, network and overhead costs."
  2. "Acquiring narrowband subscribers has been unprofitable," Bewkes said.
  3. "They were leaving us over price," he said. "They weren't leaving us because they were unhappy." Now they can stay with AOL for free and view its ads.
  4. Free e-mail accounts are available immediately, while some other features, primarily parental controls, won't become free until early September. Subscribers who dropped AOL within the past two years — about 6 million households, some with multiple e-mail addresses — will be able to reclaim their old addresses simply by logging on with their old passwords.
  5. AOL accounts for one-fifth of Time Warner's revenue - mainly from subscription sales. So the bet here is that advertising can rise fast enough to supplant the declines in subscription revenue, after factoring in cost savings.
  6. As of June 30, AOL had 17.7M subscribers; AOL lost 976,000 U.S. subs in the past quarter alone.

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