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.''"

Comments

What's the Draw?

[Puls4r]

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?

[Red Flayer]

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?

[kilgortrout]

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

Re:What's the Draw?

[mrchaotica]

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.

Good Idea

[Anonymous Coward]

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!

Fantastic idea. No, really.

[Weaselmancer]

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.