America Online will take a decisive step next week to compete in the Web portal market against Microsoft's MSN division and Yahoo 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 on the AOL site.
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 available only to paying subscribers and making them free to any Web user, AOL is trying to beef up its portal so that it will attract more visitors and advertisers, a model MSN and Yahoo have had for years.
Advertising Drives Changes
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 Google, MSN, and Yahoo.
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 those users 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, says 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 adds.
Consequently, AOL has no plans to modify its subscription prices now that most of the content and communication services can be obtained for free, he says.
Free Content and Services
Although AOL has been upgrading its portal in the past few months, the beta site's unveiling next week represents a major step forward, Campbell says.
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 notes. 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.
AOL.com will act as a hub where users have access to communication services and news and information about myriad topics, such as sports, music, and personal finance from a variety of sources, including Time Warner publications like People, Real Simple, and InStyle. Time Warner also owns the television channels CNN and HBO. AOL Instant Messenger and Web mail services, the AOL Picture service for organizing and storing photos, and the AOL Journals blogging and social networking service are all part of AOL.com's communications package.
Content will be updated continuously throughout the day, Campbell says. Users will also be able to receive AOL.com content via RSS feeds, he adds.
A central part of AOL.com will continue to be the company's search services, including general Web search, powered by Google's search engine; video search, fueled by AOL's Singingfish multimedia engine; local business-listing search, which includes the AOL Yellow Pages service; and AOL's InStore shopping search engine.
AOL.com will also point to AOL Web sites such as the movie-ticket seller Moviefone, the mapping service MapQuest, and the travel search engine Pinpoint Travel.