America Online is paying the price for falling behind in the Internet revolution. According to this morning's Wall Street Journal, AOL is considering forgoing billions in subscription revenue by allowing households with their own broadband connections to access the service for free.
The Time Warner
To be fair, AOL hasn't helped deflect the knocks. It has been gradually chipping away at many of the offerings that made it indispensable to those who outgrew AOL as the Internet on training wheels. Once the service ditched its proprietary newsgroup reader and its fast-loading message-board platform, I was surprised at how little of my online time was spent on AOL itself.
The saving grace for AOL, and for Time Warner, has been a surge in online advertising revenue that has helped soften the blow of misses elsewhere at the media giant. Time Warner doesn't want to lose that lucrative revenue stream.
Obviously, charging only for its dial-up accounts will ultimately be a dying business for AOL. If the "people familiar with the matter" cited in the article are right, we're essentially seeing the transformation of AOL from a subscriber-fed access site to a free membership-based portal. The access game will then go to the remaining players like Earthlink
AOL is awakening to reality, but this doesn't mean it's got a lifeboat waiting. Free or not, it still needs compelling reasons for folks to congregate at AOL.com. Free email isn't much of a lure, since Google
Getting cheaper, AOL? Fine. Just make sure you get smarter, too.
Longtime Fool contributor Rick Munarriz can be cheap sometimes, but he recognizes that some free things cost more than one bargains for. He does not own shares in any of the companies mentioned in this story. T he Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.