 
BOLD IS BACK: AOL A FREE PORTAL IN THE STORM
August 6, 2006
AOL plans to improve its bottom line by making its portal services free. The company announced that it will phase out much of its declining Internet access business in order to focus on the lucrative business of portal advertising.
Surfers who use an internet service provider other than AOL will now be able to use AOL portal, security and e-mail services free. AOL will still offer inexpensive dialup access, as well as broadband connections. Details of the new plan can be found here.
Wall Street is skeptical, of course. Internet access services accounted for three-fourths of AOL's $2 billion in revenue last quarter and it's not clear if AOL could offset this monumental revenue loss with increased ad sales and cost-cutting measures. Historically, the major media players have been reluctant to change their internet business models, but traditional media stocks have taken a beating in recent years. Merger-breakup-stock buyback sorcery has not been enough to excite investors.
Maybe bold is back. AOL's strategy may be a harbinger of internet business models to come.
Clearly AOL is positioning itself to compete head-to-head with Google, Yahoo, and MSN for a larger slice of the online advertising pie. And Wall Street may be skeptical, but the AOL ad network has one big plus: a proven knack for driving sales. For a more detailed analysis of search engine conversion rates, see our story: Don't Discount AOL & MSN For Ad Buys.
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