Will AOL Provide Paid Services For Free?

Is that MENSA on the phone? No. No it’s not. Now put your helmet back on.

The Wall Street Journal reported that CEO Jonathan Miller suggested to high-ranking Time Warner executives that AOL should open the gates to its subscription services, offering up for free what once cost $25.90 per month. Subscribers could given access to email and antivirus protection, among others, with an advertising-based model.

Despite US AOL membership dropping from 26.5 million in 2002 to 18.6 million in the first quarter of 2006, AOL still commands prime Internet real estate. AOL.com attracts over 100 million unique visitors per month.

But the shift to an advertising-based model, the Journal reports, would expand advertising revenue from 16 percent of total revenue to 100 percent. Last year, AOL earned $8.3 billion, 84 percent of which came from subscriptions. Miller said the switch would drop revenue by $2 billion.

The proposition would make AOL services free, but not Internet access. Subscribers would have to go through an existing ISP service to access them.

What’s the incentive? Aside from being free, David Utter reveals that the subscribers AOL has been able to keep often do so to keep a longstanding email address. AOL is banking that this shift in strategy will save it from its desperate situation.

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