America Online will take a decisive step next week to compete in the Web portal market against Yahoo and Microsoft's MSN division when it unveils a preliminary version of the new AOL.com site.
On Tuesday, AOL will roll back the curtains on a test, or beta, version of its revamped portal. There will be a prominent link to the new portal displayed at http://www.aol.com.
The new test portal will be the most visible reflection of AOL's months-long strategy of liberating content and communication features from within the confines of the company's fee-based subscription service.
By moving content and services that were previously only available to paying subscribers and making them available for free to any Web user, AOL is trying to beef up its portal so that it will attract more visitors and advertisers, a model Yahoo and MSN have had for years.
AOL's subscription service, which also includes Internet access and security services, has been losing members at a steady pace for the past couple of years. Meanwhile, the online advertising market has been growing robustly, a trend that has benefited providers of Web content and services, such as Yahoo, MSN and Google.
As of March 31, 2005, AOL had 21.7 million U.S. subscribers in its fee-based service, down 2.3 million from the same period in 2004 and down 4.5 million from the first quarter of 2003.
Consequently, AOL is shifting its strategy toward boosting online advertising, the business that is growing. Online advertising grew 26 percent to $2.8 billion in 2005's first quarter, compared with the same period last year, according to the Interactive Advertising Bureau and PricewaterhouseCoopers. In 2005's first quarter, AOL's advertising revenue increased 45 percent, while its subscription revenue fell 8 percent.
AOL, a Time Warner subsidiary, also learned through subscriber research that the services they consider essential to paid membership are Internet access, customer service and security features, such as Web-surfing parental controls and antivirus protection for the user's entire PC, not just e-mail, said Gerry Campbell, AOL's vice president and general manager of search and directional media.
"The content is peripheral to the access customer. It's not perceived to be part of the dial-up, paid package," Campbell said.
Consequently, AOL has no plans to modify its subscription prices now that most of the content and communication services can be obtained for free, Campbell said.
Although AOL has been improving its portal in the past few months, the beta site's unveiling next week represents a major step forward, Campbell said.
The new AOL.com will bring together a broad palette of free content and services, in the long-standing tradition of Web portals, and it will be optimized for broadband content, particularly video, Campbell said. AOL.com will have a new "video hub" section where users will find music videos, movie trailers, news clips and live feeds. The video will be delivered via a new AOL Video Player.
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