AOL to offer free e-mail to broadband customers
WASHINGTON — AOL LLC said Wednesday it will offer e-mail and other online services for free to all broadband customers and it will end its efforts to recruit new dial-up subscribers, as part of a major strategy shift to build its business around online advertising.
The Dulles, Va., company said it expects to cut $1 billion through the end of next year, mostly by scaling back marketing efforts related to its dial-up Internet service. The company plans to instead recruit more visitors to sign up as members on its Web site, aol.com, by luring Internet users who left AOL within the past two years to get their old e-mail addresses back.
“Now that we offer AOL services for free, there is no reason for anyone to leave AOL,” said Jeff Bewkes, president and chief operating officer of AOL parent company Time Warner Inc.
AOL’s new strategy signals a radical departure from the company’s business roots, which grew dramatically in the late 1990s as a service that helped non-tech-savvy people figure out how to log onto the Internet and find information. The company charges subscribers a monthly fee to provide Internet access and services such as e-mail.
Since 2002, AOL’s subscriber base has dropped dramatically and now stands at 17.7 million users compared to nearly 27 million four years ago. In the last three months alone, AOL lost nearly 1 million U.S. subscribers, according to the company’s financial documents.
“AOL has come to the realization if they have to compete with the likes of Yahoo, Microsoft and Google, advertising is the future. The outcome depends on the management execution” of the new plan, said Tuna Amobi, senior media and entertainment analyst at Standard & Poor’s, which has a “hold” rating on Time Warner stock. “The first year will be very critical. The erosion of the dial-up business doesn’t give management any wiggle room.”
AOL did not announce layoffs or discuss plans for them, but the company in the last year has steadily scaled back the number of employees and call centers that handle customer service operations. AOL remains a drag on Time Warner’s otherwise rapidly growing business in cable offerings, which has resulted in shareholder pressure to reshape the business.
AOL laid off 1,300 employees earlier this year at call centers in Arizona and Florida, citing declining call volume related to dial-up customer service.
Time Warner on Wednesday morning reported $1 billion in net income for the second quarter on a 1 percent growth in revenue.