AOL to Retool

With slumping ad revenues and slowing subscriber growth, AOL is changing its marketing approach, among other things emphasizing a discounted service for broadband customers:

In a pivotal and long-awaited presentation to investors, AOL Time Warner is expected to disclose a radical shift in strategy for its flagging AOL division today, switching the emphasis away from selling Internet access and toward selling an add-on high-speed version of its service to customers who may buy high-speed Internet access from phone or cable companies.

....The redirection in emphasis toward selling an add-on high-speed or broadband service will entail a big change in the company's image with consumers, most of whom continue to think of AOL as a company that connects people to the Internet, rather than as a suite of extra content and services. AOL had previously focused primarily on selling access to the Internet over phone lines, and more recently on making deals with telephone and cable companies to sell access over their wires under its own name.

But the growth in the low-speed Internet access business has begun to decline. And deals to carry AOL's high-speed service over cable or phone lines have been hard to reach and costly since many cable and phone companies have competing services. Thus, an add-on broadband service appears to be AOL's best option. (In some ways, its add-on service resembled a subscription version of the free Web site Yahoo, although AOL executives say their size and subscription revenue will enable them to offer more robust content and shopping discounts.)

AOL currently offers an add-on broadband service for about $15 a month, which is available to customers who also buy high-speed Internet access from someone else for about $40 a month.

....Mr. Miller will also discuss some of the company's early steps to bolster its online commerce, in both its high- and low-speed services. These include selling music to users directly instead of referring them to other online shopping sites. AOL is also expanding its sales of discounted, remaindered merchandise.

Continued on the next page Page 1 — Page 2

Article Author: Eric Olsen

Career media professional Eric Olsen is honored to be the founder and former publisher of Blogcritics.org, and former publisher of Technorati.com, which both rule. He is now editor, co-founder, and CEO of The Morton Report.

Visit Eric Olsen's author page — Eric Olsen's Blog