AOL Planning Move to Ad-Supported Model

garzpacho writes "In recognition of the fact that its subscriber-based revenues continue to plummet, AOL is planning to shift to an ad-supported business model. AOL's subscriber base, which peaked at 30 million users, now has less than 19 million subscribers and is still dropping — over 800,000 subscribers dropped the service in this year's first quarter alone. In addition to seeing fewer AOL CDs, a shift to ad revenue also means some serious cuts in staff size, especially in the customer service and retention departments. From the article: 'Time Warner plans to announce a series of changes at AOL that analysts say will mark the end of the company's paid-subscriber model. The company will begin relying on advertising sales rather than monthly fees paid by customers, according to the Wall Street Journal. 'I don't know whether advertising will work, but my thinking is (the changes) are basically an acceptance of what is happening,' says Joseph Bonner, a media and telecommunications analyst at Argus Research. 'This is a reflection of reality, that they have to find some other source of revenue.''"

What's the Draw?

It seems to me that AOL is looking at the search engine model and trying to copy it. The only problem is that AOL has absolutely nothing to "draw" people in the way google does. It's kind of backwards actually. AOL continues to offer bloatware, horrible customer service, a poor product, and is now going to try adding advertisement into the deal to save itself. Google offers a top notch search engine with innovative product that makes people WANT to come, and now they are looking at offering broadband and becoming their own ISP..... AOL needs to fix it's business model and offer something compelling. If you're not drawing people advertisements won't do much.

Re:What's the Draw?

Free internet is a draw for most people. Of course, once they get hooked on it they will want to upgrade to a service that is actually fast and usable...

Re:What's the Draw?

What makes you think the Internet service itself would be free? As people started switching to broadband, AOL has become more of a "value added" thing you subscribe to on top of your Internet connection (they call it "bring your own access," IIRC).

Considering the failure of stuff like NetZero (which is now more like Net$10 instead), I would think AOL would know better than to try to support modem access for free -- but then again, they may actually be that stupid.

Re:What's the Draw?

It seems to me that AOL is looking at the search engine model and trying to copy it.

Looks more like the magazine model to me. And like the magazine industry, likely to not do so well in the long run -- there is just way too much free content out there easily available. AOL makes its living off:
(1) People who don't know better (who, BTW, are excellent targets for ads for the same reason they know no better)
(2) People who don't want to let go of their email address.

Finally, as we see minority browsers get market share, especially Firefox (with its ease of customization and extendability), subscription web portals are becoming less and less useful -- moreso as the population becomes more facile with the internet and computers in general.

Re:What's the Draw?

But AOL has a killer demographic for advertisers: Clueless noobs with more money than brains. This is an advertisers wet dream.

Re:What's the Draw?

Time-Warner owns a lot of content that might be a draw.

Re:What's the Draw?

What's the draw? I now have a free AIM Phoneline account that is very useful. They also have a nice e-mail service (that does not top GMail, however).

Re:What's the Draw?

"If you're not drawing people advertisements won't do much."

This is entirely untrue. Advertising has become increasingly common on AOL and is a factor in driving customers away. So it will have an effect, just not the effect they are hoping for.

Re:What's the Draw?

now-a-days people are becoming more computer savvy

Ten minutes on MySpace will disabuse you of that notion.

Is anyone paying full price right now?

My sister uses AOL and a few months ago one of her friends called AOL to cancel his service. He told the customer service rep that he couldn't afford the service any longer and was then asked how much he could afford. He said he could afford ten bucks a month and the rep asked if he would continue his service if they would lower his cost to $10. He then called my sister and told her what happened. She called AOL, got the same question, and told the person she could only afford "maybe $7 or $8 a month" and now pays $7 per month for her service. Of course she told everyone else she knows that uses AOL.

I know a lot of companies do this but most companies aren't a network of people that like nothing more than to sit around all day bs'ing on the web.

Re:Is anyone paying full price right now?

Oh you can even talk them down to 0/month. I knew a woman who used AOL for a while, but never paid a cent. She called to cancel, and they just kept giving her freebie months. I'm not sure if she did it with seperate accounts or the same one over and over a

That's why I quit AOL

Ad supported? It was the ads that made me quit AOL a few years ago. I got 60 spams per day in my AOL inbox, and there was no way to filter than other than to add a complete individual URL to the spam filter.

Re:That's why I quit AOL

I'm suprised you actually could quit.

http://www.nbc10.com/news/9406462/detail.html [nbc10.com]

AOL: Alright, some day when you calmed down you're gonna realize that all I was trying to do was help you... and it was actually in your best interest to listen to me.

Fear. Lots of Fear.

Am I alone in thinking that this is rather bad news? We're talking about a company with a ludicrously aggressive subscription-acquisition-and-retention policy, remember -- how much worse (i.e., ad-saturated) is the web going to become once AOL becomes a major platform for adversiting?

Re:Fear. Lots of Fear.

It will not be bad at all because nobody will go the AOL properties to see the ads.

AOL Is On Its Last Leg

It's over AOL, the days of dialup are gone and people will eventually be using DSL or Cable provided by their locality. I for one am impressed that AOL even exists. I mean seriously, who uses AOL?

http://religiousfreaks.com/ [religiousfreaks.com]

Re:AOL Is On Its Last Leg

The origional Draw to AOL for its popularity was the fact that AOL software did the graphics stuff relitivly fast (For the time) and offered services that you couldn't get with with BBS's (the old ones not the Message boards). After the Internet started t

Re:AOL Is On Its Last Leg

And some people (like my wife's parents) use it because they use their aol address for their business mail, and so moving away from that would be such a pain in the ass that it's just not worth it. And I'm not talking about just backing up the older mail.

AOL is smarter than you think

I mean seriously, who uses AOL?

Not to be cliche, but suckers use AOL, which ties in perfectly with advertising, as follows:

1) Create ISP/crappy web portal/email service.
2) Make sure you're substandard.
3) Advertise the heck out of your substandard servic

Re:AOL Is On Its Last Leg

I mean seriously, who uses AOL?

People like my sister and her friends. She knows pertty much nothing about a computer other than how to get AOL fired up so she can chat or check her email. For her AOL is great. For people like you and I it just gets in t

Re:AOL Is On Its Last Leg

It's over AOL, the days of dialup are gone and people will eventually be using DSL or Cable provided by their locality. I for one am impressed that AOL even exists. I mean seriously, who uses AOL?

Well, I use it mainly because it is more than a 1/3 the pric

In unrelated news...

AOL blocked 0 spam e-mails today!

Is this effective?

How deep does the banner advertising market go? I can't imagine that there is that much advertising-per-desktop to go around, with adwords already out there thriving. In simple supply/demand terms, instead of subscribers bolting, you will see cost per cl

'Splain it to me, Lucy...

The company will begin relying on advertising sales rather than monthly fees paid by customers

AOL doesn't exactly have a reputation for its great "content". What fans it does have, it has for making the internet accessible to complete technophobes.

So perhaps I misunderstand their use of the word "advertising", but what, exactly, do they plan to advertise with?

Somehow, I just can't see big money rolling in to put banners across the top of "my cat fluffy's homepage" or the literally millions of what amount to the web equivalent of "is this thing on?".


But good luck to 'em. As much as I hate TW, and have traditionally made fun of A-O-Lusers, it saddens me to see the last of the original great ISPs slowly dying off.

Re:'Splain it to me, Lucy...

As much as I hate TW

I don't hate Time-Warner for one reason: DVD.

Back in the early days of DVD, they were the only studio that whole-heartedly supported the format. They were the first to stick their necks out and remaster their films with anamorphic tr

Good Idea

In addition to seeing fewer AOL CDs, a shift to ad revenue also means some serious cuts in staff size, especially in the customer service and retention departments

So, basically, people fed up with getting abused by their paltry customer service quit, and they lose money. To solve the problem, they shift to ad based revenue, cutting retention and service, pissing off even more people via the further reduced service who then quit, allowing them to shift to even more ad-based revenue.

It's brilliant I say! Brilliant! They've perfected some sort of perpetual money machine here!

For Whom the Bell Tolls

If the speculation and news reports prove correct, AOL's changes would be ambitious indeed. But will they go far enough, and is it possible for AOL to regain its past heft? "Will the advertising revenue ever replace dial-up?" says Bonner. "I'm not sure when and if that will ever happen. In the dial-up world, you could be all things to everybody--that worked. Now AOL needs to focus." Adds Helfstein: "The question is: What can AOL do for customers that can convince you to stop using Google or Yahoo as your homepage?"

It's safe to say that AOL has died, but the body doesn't know it yet. At one time it was a lot of people's portal to the Internet, especially in the pre-DSL days, but now I can't honestly understand why anyone keeps it. With on-demand Internet connections and browsers readily available, there's no need for this cheesy portal application, unless you're stuck using dial-up, but those numbers continue to fall rapidly.

AOL never saw the forest for the trees -- popularizing the Internet forced up connection speeds and access, and eventually they were outstripped by Yahoo, Google, and everyone else.People got tired of being kicked off and having to log back on, or paying too much on their phone bill because their "local" number was anything but. Once AOL had a large enough subscriber base, and once all those folks got a taste of the true Internet, they made demands that AOL couldn't meet, and so now they are soon to be relegated to the dustbin of history. There may come a time when people won't remember what the "A" in AIM stands for, and then AOL will be truly gone.

re: Why keep AOL?

I always wonder myself, why people keep AOL. But then I look at a number of my customers who still use it.... In one case, it's a gradeschool teacher who is barely computer-literate, but expected to have her own email address in this day and age. She d

AOL with more ads. Great.

Here's my prediction of what is going to happen:

Everybody who is dumb enough to use AOL keeps using it, but doesn't pay.

The true cheapskates of the world sign-up, but since they are cheapskates, the advertising really isn't going to work on them very well. Advertisers abandon AOL.

AOL ends up dying. Thank God.

Ads are invasive

I know, especially in this community, Im not the only one that finds advertisements everywhere quite invasive. Im not just talking about the internet either, branding and advertising is -everywhere-. With so many online vendors changing to/emphasizing ad-supported revenue streams, I have a feeling this is going to impact sales negatively in the long run...

It gets to a point where I see so much advertising, I dont even notice it. I know sub-conciously its supposed to be planting the seeds in my mind to buy things, but my spending habits have not changed other then necessities since I first started making money... I just see this method as a failure in the long run. I think the business of the future will be successful first due to customer service, and a very close second on quality of the product. Everyone is so connected now due to the internet, word of mouth advertising should become more and more viable as a primary advertisement source, and we can finally have our mental space back...

Ah-ha!

Looks like all those AOL customers have gone AWOL!

*ducks*

Kill it with fire!

We've come a long way from the 'walled garden' model, haven't we, AOL?

Yes... we think you've had a good run, but perhaps it's time to take a rest, hmm? You've been working really hard.

Just lay down here and have some delicious kool-aid.

#1 most frequently overheard comment during merger

"Don't worry about that broadband nonsense. It's just a passing fad."

-Eric

Great, as if AOL wasn't slow enough

Not that I have ever used AOL, but unfortunately some family memebers I support do... and their number one complaint is that "my internet is so slow". So now they will get double slammed with ads, AOL's and whatever webpage they decide to look at. I'm su

New slogan

Instead of 'only morons use AOL', now it will be 'only cheap morons use AOL' :P

Really, how many times have you seem some business' comercial on tv, or businesscard on a bullten board (the old fashion kind with cork and pins), and it had an @AOL.COM email a

Pure Crap

I'm sorry, but that's what AOL is. I've had the displeasure of having to deal with them for YEARS.

I'll just be nice and ignore the fact that they bought and killed The Imagination Network, which was a blast.

Let's talk about their software. Their software that, to this day, takes like 30 seconds to start up, if it's feeling fast. Their software that often crashes after closing so when you think it's gone it's actually there sucking up 100% (happens almost daily on one of our computers). Let's talk about their integrated software suite that made since back when no one had a web browser but is now just an annoying piece of bloat-ware that should have been replaced 5 years ago minimum.

But they are going ad supported. You don't say. You'd think they were now based on using their software. In the last few years, they have gone to incredible lengths to cram ads on EVERY SINGLE SCREEN they display. Your mailbox? It has ads. Reading an e-mail? It has ads. Their welcome screen? Ads.

About a month ago, they started something new. When you exit AOL... an ad comes up. But it isn't just some little ad. It's as big as the welcome screen and it always seems to be for AOL.

But wait, it gets better.. that ad has a close button. And AOL doesn't exit until you press it. That means that choosing "exit" from the file menu DOESN'T EXIT AOL. This also seems to happen before you log off, so good luck if you don't have an unlimited plan for some reason and you forget about this.

I can only tell you from having to support my parents on AOL for the last 5 years or so (they've been members longer, it just wasn't so bad before) that AOL is a NIGHTMARE. It's amazingly slow. It crashes. If it gets screwed up (and it has) reinstalling often doesn't fix it. When you upgrade, it makes a new folder in Program Files and leaves the old version there, but deletes the shortcuts to it. Nothing like looking at someone's computer and seeing 5 copies of AOL. They continually add terrible software that only slows things down OUTSIDE AOL like their virus protection (we already that had), their firewall (WE ALREADY THAT HAD), and more. And there is something to be said for a program that keeps ALL the users downloaded files in some random directory by default. That was acceptable back in the Windows 3.1 days, but ever since Windows 95 those thins are supposed to be in My Documents. But instead, this are spread across the computer. Can't find a file? Did you open it in AOL? Then it isn't where it should be, it's in C:\Program Files\America Online 9.0 Security Slowdown Edition\Something\Or\Other. Also, what other e-mail client DELETES THE MESSAGES YOU'VE READ? You read a message, and when you log off it gets moved to "Read Meassages" or something like that. And the stuff in that folder, seems to get deleted. I don't know if it is the next time you log off, or after 1 week, or what. But if you don't specifically save it somewhere or keep choosing "Keep as new" (what my parents use) then it will go away FOREVER.

I've tried to switch my parents off. I've tried to get them to use IE or FireFox (instead of their constant problems in AOL). I've tried to move them over to GMail. I think I'm getting closer. I can't tell you how much easier my life would be without AOL.

Ah, AOL. You only outlived your usefulness about 7 years ago. All you've done since then is make things worse for everyone else. You were good at one point. It's telling that you've been hemmoraging subscribers for years, and the only way you managed to stay around during the boom (when EVERYONE was buying computers) was by generating 0.5% of all trash in the US with those stupid CDs that were put in EVERY MAGAZINE PRINTED.

Oh, yeah, then there is the Time Warner merger. That was a stroke of genius, huh.

Anyway, the point of this whole rambling anti-AOL post was that AOL already puts ads everywhere. Either their are raking in the cash and don't need the subscriber fees, or they are going to be in trouble when they do

Uh oh

Now how are they [nomoreaolcds.com] going to reach their goal?

In related news

Due to plummeting sales Mcdonalds announced plans to add dirt to their menu.

AOL is AOL is AOL is AOL...

No matter what method it tries to use to separate thier customers from thier hard-earned dinero, it's still AOL.

Same lousy service, same reputation as the dumbed-down "Intar-web thingy", same monthly shipment of drink coasters... er, I mean CDs.

This almos

Re:AOL is AOL is AOL is AOL...

Actually AOL is trying to shift who their customers are. Instead of trying to charge fools to look at regurgitated information that is available for free on the Internet, they want to charge advertisers for the opportunity to regurgitate their advertising

1990 called

AOL is irrelevant and obsolete.

They still run on telephone modem due to restrictions imposed by the FTC from the TW/AOL merger - AOL cannot use TW's cable resources unless TW opens their pipes to competitors (which they have refused to do).

No geek of any stature would even think of subscribing to AOL and there is a uncomplimentory generalization of AOL members when they post to a forum.

AOL's solution to the spam problem is a whitelist which you have to pay a fee to send mail to.

If you send an email to an AOL account that is dead, you don't get a bounce so you have no feedback if your friend received it. Over time people stop bothering to email to any AOL account.

There are better alternatives to AIM and it has no place in the office. TW tried to make AIM the corporate messaging standard and it failed miserably.

AOL is on the blacklist at corporation IT departments. AOL software takes over your PC and requires a complete reinstall to remove it, which is not a favorite pasttime of IT.

AOL does everything possible to keep their members in their "walled garden" - you cannot even change the home page in the AOL browser, it is fixed at AOL dot com.

There is a growing backlash against aggressive mass marketing and people are getting tired of AOL junk mail CDs landing in their mailbox.

AOL goes to great lengths to prevent members from unsubscribing. Frustrated customers will tell all there friends to stay away from AOL. That's not how you build loyalty.

Someone please tell me how a shift to advertising revenue model is going to solve all this.

Re:1990 called

AOL is irrelevant and obsolete.

In my book, AOL became obsolete the day they started sending their spam on useless CDs instead of floppy disks. They switched from being my free supply of removable media to becoming a totally useless annoyance. You'd think

redundant?

"planning to shift to an ad-supported business model"

Considering the amount of ads paid-subscribers endure, I'd say it's been effectively "ad-supported" for a decade now. At least, from an end-user perspective there will likely be no obvious change in AOL

New cancellation policy

Does this mean that they won't let you cancel AOL unless you buy from an advertiser?

Switch?

I thought they were already? What else do they call it when my parents need to click 'no' on three to four pop-up ads when they login?

Fantastic idea. No, really.

Dwindling user base? Here's the cure.

Flood them with mandatory advertising through your connection client. I'm sure that lots of modem using people are going to be double-plus happy waiting all that extra time downloading megabytes of extra rich shockwave advertising content at 56k, and then wading through it all just to get their email. Freaking brilliant.

If you call to cancel

They will switch you to the free plan now. I have a number of people for whom I manage their "internets!@#@@!!" and have finally gotten around to getting them all comfortable with gmail. I've had them in the "walled garden" for a while (14.95 a month AOL over Broadban plan) -- when I called to cancel for each one of them, AOL offered the same "we'll give you the service free" shtick. So if you're still using AOL, might as well take advantage now. (No clue what happens when the program is discontinued)

Goodbye!

http://www.mentalsoup.org/soundfiles/phrases/GOODB YE.WAV [mentalsoup.org]

customer service and retention departments

Yes, because nothing helps keep a customer more then poor customer service and a lack of people trained to keep the customers. Then again, I do remember their tactics "Oh stay, here let us give you 6 months free." Six months later "Oh stay, here let us give you 6 months free." Followed by someone saying "I noticed on january you accessed this much, and on February that much" - which really makes me you know happy.

AOL just has a rep, and not a great rep. Nobody wants their crappy interface anymore which is bloatware.

Wait, you're talking about AOL users here

Who wouldn't want to advertise to the gullible?

"Install our free screensaver and it will speed up your Internet tubes 200%!!!"