Some news leaked today has cast a bit of a shadow over Time Warner's (NYSE:TWX) earnings announcement tomorrow. News agencies are reporting that its America Online unit will cut 700 jobs, or 5% of its domestic workers, mostly at its Virginia-based headquarters. When will the subscriber defections stop? might as well become a frequently asked question for AOL.
It's not hard to imagine why AOL's having problems, since its service is wedded to old-school dial-up, at least in the perception of many people. The high-speed Internet access now widely offered by cable and telecom firms and bundled into existing bills continues to woo Internet users away from AOL.
Indeed, AOL has been feverishly trying to develop other avenues for revenues, such as anti-virus products, content products for broadband users, and even a nod to its previous life as a portal-like site. There was also its recent acquisition of Advertising.com.
If AOL's recent initiatives aren't successful, that makes an extended search for lucrative niches a necessity for survival. Even with AOL's evolving face, one might think of the myriad popular, free options technophiles have these days. Yahoo! (NASDAQ:YHOO) is no slacker, contentwise, and many people turn to Google (NASDAQ:GOOG) for the lion's share of Internet-based queries and destinations.
Amazon.com (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) and others have online shopping down pat. Meanwhile, when it comes to tunes, lots of people are jamming out to Apple's (NASDAQ:AAPL) iTunes and iPod. Not only are most people not the amateurs AOL used to target, many are blogging their way to their own Internet content offerings.
Where does AOL fit into all of this? In recent memory, AOL has offered lots of products that do fulfill proven needs -- but also have potent rivals like the ones named above.
It seems to me that AOL needs to search out undiscovered needs. And that's going to take some serious creativity. That may be asking a lot, in my opinion, since historically, AOL aimed for Internet newbies, not cutting-edge, first-adopter Netizens. (There is an exception -- its AIM product, which blew us all away with its ability to woo both novice and geek alike.)
However, a wait-and-see approach on today's news is likely a wise move. Some clarity is definitely needed, as AOL obviously continues its ongoing struggle to remain viable.
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Alyce Lomax does not own shares of any of the companies mentioned.
