AOL to Go Free in September

By Ed Oswald, BetaNews

August 2, 2006, 12:04 PM

As expected, Time Warner said Wednesday it would no longer charge broadband users of its online service AOL in a move designed to boost advertising revenue. While the company will still offer dial-up access at $25.90 USD per month, it would no longer be aggressively marketed.

The switch to a free service is a real gamble for AOL -- the company is expected to lose about $2 billion in subscriber revenue as a result of the move, which must be made up in advertising. However, something needed to be done, as AOL has lost a third of its subscribers since 2002.

"This is the next logical step for AOL to capitalize further on the explosive rise in broadband usage and online advertising," Time Warner president Jeff Bewkes said. "With its robust and rapidly expanding advertising operation, we expect to put AOL back on a growth path."

The company is even extending an open hand to those who may have left the service within the past two years. Former customers will be able to reactivate their accounts for free when the effort takes effect in September.

Products to be offered for free include AOL's signature integrated software application, AOL e-mail, instant messaging, a local phone number with unlimited incoming calls, and social networking applications.

An update is planned for the company's client, which could come in the form of AOL Streamliner, as well as new free products in security, storage, personalized e-mail domains, video and search. Streamliner is currently in beta testing and combines e-mail, Web browsing, instant messaging and a media center.

"The AOL Network has over 100 million unique visitors per month, and we'll work hard to engage Internet users with new products that will be available for free on the Web," AOL chairman and CEO Jonathan Miller said.

AOL says it is confident it would be able to harness the online advertising market in order to make its plans a reality. AOL has the second largest domestic audience and holds the third largest advertising network in the United States, which continues to grow. In the second quarter, advertising revenue grew 40 percent year-over-year.