For those of us who have been watching AOL sink deeper and deeper into non-sensical gambits to right its listing ship, today’s New York Times piece by Saul Hansell is just more evidence of the chronic flailing characteristic of the online giant. As the WSJ reported last week, AOL is indeed eyeing a strategy that will pull the plug on its premium service in favor of concentrating resources into building up advertising revenues with a completely free service, a la Yahoo.
In two weeks, the board of Time Warner Inc., which owns AOL, will hear a proposal from Jonathan Miller, AOL’s chief executive, calling for a near halt in marketing for AOL’s 17-year-old Internet access service, price cuts for existing customers and thousands of layoffs. His goal is to devote all of AOL’s energy into building its free Web-based services.
However, the prospects for suffering short-term subscriber revenue losses in favor of long-term ad revenue growth are tenuous at best.
The investors who have looked at AOL’s advertising performance so far have not seen a clear picture of a turnaround. Last fall, the company started promoting the free AOL.com, which featured most of the content it had offered its paying subscribers. AOL says 35 million nonsubscribers have used the free site. But it has not replaced the traffic lost from subscriber defections, because subscribers view many more pages than nonsubscribers. And each page, of course, is an opportunity to display advertising.
Time Warner, of course, is stuck — AOL is sinking fast no matter what, so some way of dealing with the problem has to be developed. Still, as Merrill Lynch analyst Jessica Reif-Cohen notes in Hansell’s piece, it’s way past tiresome to read of yet another turn-around strategy at AOL.
Ms. Cohen of Merrill Lynch said she had lost count of AOL’s various revival plans.
“This one seems to make sense,” she said, “but so did their other strategies.”
Cynthia Brumfield at 8:20 AM|Comments(0)
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