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AOL offers freebie email, IM and more
Chasing online ad revenue like a Google or Yahoo!...

By Elinor Mills

Published: Thursday 03 August 2006

Time Warner on Wednesday announced it will give away email, software and other web services for free to high-speed internet users in a bid to boost online advertising sales.

Time Warner president and chief operating officer Jeff Bewkes said: "This is the next logical step for AOL to capitalise further on the explosive rise in broadband usage and online advertising."

The AOL transition is set to be completed in early September, and the services to be offered for free include email, IM, a local phone number with unlimited incoming calls as well as safety and security features. AOL said it would continue to offer dial-up internet access but will not aggressively market the service.

The move will further transform AOL, the US' largest ISP - primarily through dial-up - into a Yahoo!-style media portal specialising in offering free content and communications. For several years now, AOL has been moving toward focusing its resources on the web in an effort to staunch losses from subscriber defections and take advantage of the lucrative online-advertising market.

This isn't the first time AOL has tried to reinvent itself to keep up with the Googles and Yahoo!s of the world.

Joe Laszlo of JupiterResearch said: "AOL has gone through at least four revisions of how it was going to evolve as people connect to the internet via broadband instead of via dial-up.

"AOL's core strategy is still dial-up... but dial-up is clearly waning and they do need to find a way to stay relevant in the broadband world. Longer term, the AOL strategy is definitely one of being a media company that maybe makes a little money on the side off subscription revenues."

What began in the 1980s as a bulletin board service and online game provider became, under eventual chief executive Steve Case, the most popular online service for newcomers to the web.

In the mid-1990s, the company began charging a flat-rate fee for dial-up internet access, adding a broadband service in 2001. It moved to a "Bring Your Own Access" plan in 2003, which let customers layer their AOL service on top of their existing broadband connection from a different provider.

In June 2005, AOL revived a strategy of bundling high-speed access, and a year ago it relaunched its AOL.com site, opening up to all web users content previously available only to paying subscribers.

The moves were designed to stem the tide of subscribers who have been abandoning the legacy AOL service in recent years. The company has lost nearly 30 per cent of its subscribers since September 2002. Meanwhile, Google has seen advertising revenues push its profits and stock through the roof.

Time Warner on Wednesday also posted a second-quarter profit on more digital phone and high-speed data customers, and reported strong growth in online advertising as it disclosed its plans to offer the free services on AOL.

The company raised its full-year forecast for adjusted operating income before depreciation and amortisation growth in the low double-digit percentage range from the high single digits after factoring in the purchase of cable operator Adelphia Communications and other items.

Second-quarter net profit was $1bn, or 24 cents per share, compared with a net loss of $409m, or 9 cents per share, in the year-earlier period, when it settled shareholder lawsuits. Revenue rose one per cent to $10.7bn.

The growth of broadband connections has made video a must-have for portals and other sites as well. AOL has mined Time Warner's vaults to compete on video. On Monday, AOL said it would preview a new video portal with more than 45 on-demand channels, a programming guide, video search and the ability to upload and share video.

Reuters contributed to this report

Elinor Mills writes for CNET News.com