If AOL Time Warner (NYSE:AOL) ever needed a wildly successful launch of the latest version of its online service, it's now. Once a standalone company -- and a soaring one at that -- AOL has been flagging during the last few years as subscribers flee by the thousands and advertising revenue plummets.
Last quarter, AOL lost 804,000 subscribers, bringing its total narrowband subs to a number not seen since late 2001 -- about 25 million. In the same quarter, advertising revenue nosedived 48%. Management is hoping that Friday's launch of AOL version 9.0, along with a recent $35 million marketing spree, will stem the bleeding and increase broadband subscriber interest.
The problem is, versions 7.0 and 8.0 -- both of which touted enhanced broadband capabilities -- didn't reverse losses in AOL's member base, and mere content enhancements in version 9.0 aren't likely to do the trick, either. More and more people are subscribing to Digital Subscriber Line (DSL) services marketed by the likes of SBC Communications (NYSE:SBC) and Verizon (NYSE:VZ), or they're joining a less expensive Internet service offered by Microsoft (NASDAQ:MSFT) or EarthLink (NASDAQ:ELNK).
Cable Internet providers such as Comcast (NASDAQ:CMCSA) are also stealing away narrowband AOL subscribers through packaged cable TV and Internet deals, even though AOL has the largest cable network in the country and is also growing cable subs.
So, the question is: Launching tomorrow for broadband users and later this summer for all AOL users, how will version 9.0 Optimized (as it's called) steal back market share?
The strategy includes offering AOL-exclusive content from Time Warner's enormous war chest, including Time, People, and Entertainment Weekly articles; enhanced Instant Messenger, including an ability to send photos and audio through IM; better spam filters and new e-mail features; and enhanced broadband content with a more dynamic welcome page. Additionally, Apple's (NASDAQ:AAPL) QuickTime media player will be offered for the first time, alongside the usual media players and AOL's new proprietary player.
All these features and exclusive content, marketed well, should be enough to gain new interest from those relatively few Americans who have yet to sign online, but may not be enough to keep AOL subscribers who are ready for something different from moving on. For many, marketing deals from the Baby Bells and competing cable companies keep beckoning. Plus, when you're the largest ISP with perhaps 20% of American households already subscribing, it seems easier to lose market share than gain it.
