Free AOL

I have five email inboxes, three of which are consolidated into Entourage, Microsoft's (Nasdaq: MSFT  ) mail client for the Mac. The one free email account I have -- through Hotmail -- isn't aggregated into Entourage. That's because handling email is work. A lot of work, in fact. So you can imagine that I'm more than a little suspect of the move by Time Warner's (NYSE: TWX  ) AOL unit to enter the free email fray.

On the one hand, it makes perfect sense. I mean, really, email is absolutely central to the brand identity of the firm. Anyone else remember AOL starring alongside Tom Hanks and Meg Ryan in the movie You've Got Mail?

On the other, AOL is moving slowly into a market that is rapidly passing it by. Though the new service will reportedly offer a spate of rich features that rival Outlook -- including spam filters, signatures, an address book, search, and the ability to add organizing folders -- it won't be offered beyond subscribers until later next year.

How much sense does that make when Google (Nasdaq: GOOG  ) has seen its Gmail service and the gigabyte of email storage it provides catch on like wildfire? And how about Yahoo! (Nasdaq: YHOO  ) and Hotmail, both of which are aggressively upgrading their email services? As each day passes, the chance of AOL getting even considered in a matchup against these rivals gets slimmer.

Still, AOL has to do something, and the free email service could help it catch some advertising dollars, especially if it were to ape Microsoft's strategy. Mr. Softy includes ads with its MSN Messenger instant messaging client and has created tight links between it and Hotmail. Similarly, AOL could target a combined debut of a new version of its wildly popular AIM messenger with AOL Mail to draw users.

But it also may be too little, too late for AOL, which has faced a series of recurring problems. Not only has it lost some 4 million subscribers over the past two years, but it was also still cutting jobs as of earlier this month. Those struggles continue to be a plague on Time Warner's operating results. If it keeps up, the media giant may be forced to hand AOL a pink slip of its own.

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Fool contributor Tim Beyers was an AOL subscriber many, many years ago. Though he's not going back, he doesn't mind the "get 1,000 hours free!" CD come-ons. The little discs make good toys for his young children. Tim doesn't own shares in AOL or any of the companies mentioned in this story. You can find out what stocks Tim owns by checking out his Fool profile, which is here.


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