AOL gets the message
AOL, BY FAR THE LARGEST Internet service provider, wants to bet the house on free expression. That’s free as in “free beer,” not “free speech.” Under a plan developed by Chief Executive Jonathan F. Miller, the company would stop trying to persuade people to pay for AOL’s content and most services. Instead, anyone who can get onto the Internet would have free access to the articles, images, interactive tools and other goodies that once were provided exclusively to AOL subscribers.
The goal is to attract more people to AOL’s online properties and compete more effectively with the likes of Yahoo, Google and Microsoft’s MSN in the race for advertising dollars. The company would still provide Internet access to millions of subscribers, but the days of free AOL discs in the mail would be over.
The proposed shift is just the latest in a series of attempts to revive the company, which has foundered since America Online used dot-com-bubble-inflated stock to buy Time Warner six years ago. That marriage of old and new media proved barren, and the Time Warner side ultimately regained control (going so far as to excise “AOL” from the corporate name in 2003). Still, Miller’s plan may prove as much of a bellwether as America Online’s switch to flat monthly fees for unlimited Internet use in 1996 -- a change that helped fuel the Internet’s transformation into a mass-market phenomenon.
That’s because it signals the end of the largest and most successful effort to treat the Internet like cable TV, where people pay for an easy-to-use package of content designed for a broad array of tastes. About 13 million people use AOL and a dial-up modem to connect to the Internet, paying roughly $6 a month more than most dial-up connection services. Nearly 6 million more pay AOL $15 a month for a subscription even though their Internet access is supplied by someone else -- a cable TV operator’s broadband service, for example. Among other features, the fees pay for an e-mail program, radio stations, news, gossip, advice, discussion groups, instant-messaging programs and kid-safe browsing, all within a private, closed network.
These elements are now openly available from other online providers for free, or at least cheaper. Except for the occasional celebrity chat session or musical performance, AOL can’t claim to offer much that is truly exclusive anymore.
But exclusivity has never really been the key to success at AOL. It rose to dominance in the 1990s by demystifying the Internet. Now that customers have gotten up to speed, that simplicity has become more of a straitjacket. More than 70% of Americans who use the Net from home do so through broadband, and most prefer a limitless Internet with ever-changing hotspots to the safe and conveniently groomed AOL pasture.
With subscriptions down 30% since 2002, the wind was clearly blowing in the direction of advertising, not monthly fees, and AOL has been losing ground to competitors that don’t charge access to their sites. The leading companies online nowadays are the ones building audiences around free content, a la YouTube.com and MySpace.com. Ironically, this kind of business model was all the rage during the dot-com bubble too. This time around, AOL may finally join in.