AOL’s Next Step
It’s do or die time for AOL. If they want to re-stake their claim in the market, the time has come to formulate a new strategy. Clearly, no one is interested in free AOL minutes.
There’s been a lot of buzz lately that AOL may be considering offering its service free of charge to anyone with a high speed Internet connection. Sources say AOL hopes letting longtime users keep their beloved email addresses and other AOL-specific features will deter them from canceling their accounts and giving their traffic and revenue to competitors like Google and Yahoo!.
I’ll be honest, when I first heard the news I thought to myself, “So AOL wants to be like Google?” And then I realized, AOL is supposed to be like Google. Though the only ones who rely on AOL search now are grandmothers and the totally un-hip, AOL’s original focus was based around search. The media/ portal aspect came later. If they’re going to survive in today’s market, it’s time for a reinvention.
The decision to bid their granny status farewell will be a risky one and will ultimately decide the fate of AOL. The Wall Street Journal estimates the new proposal could cut AOL’s subscription profit in half over the next three years and sacrifice nearly $1 billion of its operating profit through 2009. Their market share has been steadily decreasing in recent years and will surely flop as things reorganize.
It sounds grim, but AOL hopes an increase in Internet ad revenue will offset any decline in subscription revenue and ultimately leave the company more profitable. The new ad-based strategy will hopefully allow AOL to generate more traffic and boost online advertising. Online advertising already accounts for 80 percent of AOL’s total revenue, how much more are they hoping to increase it?
It’s a bold move for AOL, but there’s no point in sitting on your laurels trying to squeeze every last dime out of your current system while continuing your fate as an also-ran. They’ve been doing that for too long and they’re not bringing in the amount of new subscribers they need to make the old way of doing things profitable. The rapid adoption of high speed Internet and free email services, like Hotmail and Gmail, have stolen AOL’s market.
I believe AOL’s success will be directly tied to whether Time Warner and stockholders are patient enough to give AOL the time it needs to rework itself.
I think there’s still a place for AOL in today’s market, assuming they can market themselves correctly. They have a following (be it, small) of very loyal users, people who have been AOL-loyal for more than a decade. I think they’ll wait and see where AOL is going with all this before jumping ship.
And old members will be propositioned back with the promise they can reclaim their old AOL email addresses. Will nostalgia and free AOL be enough of an incentive to lure users back or have people truly moved on? That’s what AOL is about to find out.
Ask Jeeves was able to re-brand itself into the smarter, faster Ask, so there’s no reason AOL can’t procure the same fate. But even with a fresh start, it will be difficult. Many have already written AOL off and getting them to change their minds will be an uphill battle.
But AOL does have some value. It must for Google to spend $1 billion in order to obtain a 5 percent stake in the dwindling company. The AOL brand is worth something.
Who knows, maybe Google will take AOL’s slightly weakened state and try to acquire them. AOL is currently ranked as the third biggest portal behind Yahoo and Google. Google’s search with AOL’s media portal could be a perfect fit. Users could subscribe to GoAOLgle and find everything they could ever need in one Google-ized site.
But even if they decided to go it alone, there’s a chance for AOL to re-brand itself into something that will excite users. They will likely never compete with Google in terms of pure search, but the AOL portal has the potential to surpass Yahoo!’s. A relevant search with a media portal users already trust? Isn’t that what Google has been trying to secure? Believe it or not, I think AOL has a chance to get there first. And that’s the power this re-brand has the potential to unleash and how AOL can get itself back in the game.