The walls surrounding America Online Inc's well-manicured gardens are crumbling.
In a move both risky and essential, AOL is abandoning its strategy of exclusivity and will free much of its music, sports and other programming to non-subscribers in hopes of boosting ad sales.
PHOTO: AP
The decision could help the company counter declining subscriptions as Internet users move to high-speed connections. At least that's the plan.
The danger is that the bold new strategy will instead accelerate the erosion of AOL's core revenue source.
To begin with, the change pits AOL against big guns Yahoo Inc and Microsoft Corp, which in turn are looking over their shoulder wondering what search leader Google Inc will do next.
"AOL is left looking like the race car in a race that nobody wants to run in anymore," said Rob Enderle, an industry analyst in San Jose, California. "AOL's dead as it exists. It has to find a way to become relevant again."
Though AOL executives insist the company's short-term prospects are healthy, they agree they ultimately must rely less on their legacy subscription business. With the recent renaissance in online advertising, AOL wants a bigger share of those dollars -- and to do that, it must open its members-only "walled gardens" to the public.
Not that it's abandoning the subscriptions: It's all about a better balance.
"Having two revenue streams inoculates you from the vagaries of the industry," said Ted Leonsis, vice chairman in charge of AOL's new ad-driven audiences division. "We could have an advertising recession, and that would be really bad if you were just an advertising-driven company."
Leonsis insists the change is less fundamental than it seems, given that AOL already has thriving `untethered' properties it acquired, including Moviefone and MapQuest. Leonsis estimates AOL will need to grow its monthly audience of unique visitors, to all the sites it owns, by only 25 percent within five years.
In fact, AOL's sprawling headquarters outside Washington, shows little sign of change save for a new triangular logo that now points to the right, or forward, rather than up. Employees change supervisors, not offices. The mission statement in the lobby remains a legacy of ousted chief executive Steve Case.
AOL, launched in 1989, has thrived on selling Internet access plus exclusive programming in one easy-to-use software package that fits on a disc. It's how millions first got onto the Internet.
But as Internet users matured, they often dumped AOL along with their dial-up connections. AOL responded by setting up a broadband division, first focusing on a packaged offering similar to dial-up and later concentrating on a programming-only plan called "bring your own access."
The company now has nearly 5 million broadband subscribers, up from about 3 million a year ago. But overall the number of US. subscribers dropped to 23 million in September, down from a peak of 27 million two years ago.
Nonetheless, AOL remains committed to broadband and says that it considers the free access to programming a natural outgrowth.
"We've built that new business, and now we have an opportunity to focus on creating a different, a new balance, a better balance" between subscription and advertising, said Kevin Conroy, AOL's executive vice president for Web brands.
True, AOL has a late start compared with Yahoo and Microsoft's MSN, but executives say the shift couldn't have occurred any sooner.
For one thing, AOL wasn't in the business of producing content until a few years ago. It used to subcontract that work to outside companies like iVillage, which sold the ads. Since then, AOL has built not only an in-house content-development team but also an advertising sales network to capitalize on it.
AOL has also upgraded its technology to make it more compatible with the outside world.
It has gradually switched from a proprietary programming language, known as "Rainman," to the hypertext markup language that powers the Web at large. It also has standardized ad formats; no longer would Moviefone and Netscape, say, have different rules on how big ads were and where they were placed.
Last month, chief executive Jonathan Miller reorganized the company, eliminating 700 jobs, to create distinct access and audiences units: The former will focus on retaining subscribers while the latter tries to grow audience through free programming.
Executives have a rough idea of what to make free and what to keep exclusive.
Extensive research over the past two years showed that subscribers were willing to pay for safety and security. Last month, AOL offered new members-only software that incorporates free antivirus, firewall and other protections.
A kids area called KOL, a teens offering called Red and a Spanish-language service were also deemed popular and worth the subscription price.
Just about everything else is fair game for the AOL.com reincarnation, expected for next year. News and music are among features not deemed essential hooks for subscribers but instead features worth taking to a broader audience.
DEFENDING DEMOCRACY: Taiwan shares the same values as those that fought in WWII, and nations must unite to halt the expansion of a new authoritarian bloc, Lai said The government yesterday held a commemoration ceremony for Victory in Europe (V-E) Day, joining the rest of the world for the first time to mark the anniversary of the end of World War II in Europe. Taiwan honoring V-E Day signifies “our growing connections with the international community,” President William Lai (賴清德) said at a reception in Taipei on the 80th anniversary of V-E Day. One of the major lessons of World War II is that “authoritarianism and aggression lead only to slaughter, tragedy and greater inequality,” Lai said. Even more importantly, the war also taught people that “those who cherish peace cannot
Taiwanese Olympic badminton men’s doubles gold medalist Wang Chi-lin (王齊麟) and his new partner, Chiu Hsiang-chieh (邱相榤), clinched the men’s doubles title at the Yonex Taipei Open yesterday, becoming the second Taiwanese team to win a title in the tournament. Ranked 19th in the world, the Taiwanese duo defeated Kang Min-hyuk and Ki Dong-ju of South Korea 21-18, 21-15 in a pulsating 43-minute final to clinch their first doubles title after teaming up last year. Wang, the men’s doubles gold medalist at the 2020 and 2024 Olympics, partnered with Chiu in August last year after the retirement of his teammate Lee Yang
The Philippines yesterday criticized a “high-risk” maneuver by a Chinese vessel near the disputed Scarborough Shoal (Huangyan Island, 黃岩島) in a rare incident involving warships from the two navies. The Scarborough Shoal — a triangular chain of reefs and rocks in the contested South China Sea — has been a flash point between the countries since China seized it from the Philippines in 2012. Taiwan also claims the shoal. Monday’s encounter took place approximately 11.8 nautical miles (22km) southeast” of the Scarborough Shoal, the Philippine military said, during ongoing US-Philippine military exercises that Beijing has criticized as destabilizing. “The Chinese frigate BN 554 was
The number of births in Taiwan fell to an all-time monthly low last month, while the population declined for the 16th consecutive month, Ministry of the Interior data released on Friday showed. The number of newborns totaled 8,684, which is 704 births fewer than in March and the lowest monthly figure on record, the ministry said. That is equivalent to roughly one baby born every five minutes and an annual crude birthrate of 4.52 per 1,000 people, the ministry added. Meanwhile, 17,205 deaths were recorded, resulting in a natural population decrease of 8,521, the data showed. More people are also leaving Taiwan, with net
RSS