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Jeffrey Bewkes, Time Warner's chief operating officer, told investors at a Goldman Sachs media conference that its strategy had attracted new users beyond those who were once paying customers of the online service.

Some 40 percent of new users were not former subscribers, Bewkes said. "That means there is demand for AOL beyond the existing base," he said.

In addition, subscribers who formerly paid for AOL services were moving to its free services at a quicker rate than originally predicted by AOL management, Bewkes said.

Bewkes said advertising sales at AOL were "very robust," without elaborating.

Advertising growth would be unlikely to offset a drop in subscription revenue for another year or two but is a more profitable source of revenue, he said.

"This was a screw-up, and we're angry and upset about it. It was an innocent enough attempt to reach out to the academic community with new research tools, but it was obviously not appropriately vetted, and if it had been, it would have been stopped in an instant," AOL, a unit of Time Warner, said in a statement. "Although there was no personally identifiable data linked to these accounts, we're absolutely not defending this. It was a mistake, and we apologize. We've launched an internal investigation into what happened, and we are taking steps to ensure that this type of thing never happens again."

Jonathan Miller, AOL’s chairman and chief executive, told The Associated Press that it no longer made sense fighting an industry trend, acknowledging that AOL wasn’t competitive with its "above-market rate" offering.

Customers "were leaving us over price," Miller said. "They weren't leaving us because they were unhappy."

Encouraged by such trends as its 40 percent jump in ad revenue in the second quarter, AOL figures that by making services free, it can prevent users from defecting to Yahoo, Google, Microsoft and other providers that have offered free e-mail for years.

Rob Enderle, an analyst with the Enderle Group, said the restructuring brings Time Warner Inc.'s online unit in line with "this decade as opposed to the last decade" and lets the company "hold on to the customers they had left."

“Had they done nothing, by the end of the decade, they would have been gone,” Enderle said.

The move marks the end of an era for a company that grew rapidly in the 1990s by making it easy to connect online, giving millions of Americans their first taste of e-mail, the Web and instant messaging through unsolicited discs stuffed in mailboxes and magazines.

In two weeks, the board of Time Warner Inc., which owns AOL, will hear a proposal from Jonathan Miller, AOL's chief executive, calling for a near halt in marketing for AOL's 17-year-old Internet access service, price cuts for existing customers and thousands of layoffs. His goal is to devote all of AOL's energy into building its free Web-based services.

Traditionally, when companies have profitable but shrinking businesses, like AOL's access service, they try to milk as much money as they can from them without investing new cash. Indeed, that is what Mr. Miller has tried to do for the last several years.

Mr. Miller will defend his unusually draconian plan by arguing that trying to wring every last dime from its dial-up subscribers is preventing AOL from being as aggressive as it can in competing with Yahoo, Microsoft and Google on the Web, according to AOL executives involved in developing the proposal. With such powerful and fast-moving rivals, he wants to hasten the pain to speed the recovery.

This plan will require the board to accept lower profits at first until the advertising revenue grows further, the AOL executives said, although they declined to say how much profits would fall and at what rate. (The AOL executives spoke on the condition of anonymity because the plan is not scheduled for public announcement until Aug. 2.)

Picking our list wasn't exactly rocket science; it was more like group therapy. PC World staffers and contributors nominated their candidates and then gave each one the sniff test. We sought the worst of the worst--operating systems that operated badly, hardware that never should have left the factory, applications that spied on us and fed our data to shifty marketers, and products that left a legacy of poor performance and bad behavior.

"If AOL or another ISP decides that someone's a spammer, then no e-mail from that individual gets through," said EFF attorney Cindy Cohn, whose group opposes the AOL plan. "But there's a fundamental difficulty at the heart of the spam debate: The only one who knows what you want delivered in your inbox is you."

For years, e-mail users complained that torrents of unwanted messages clogged their inboxes and crimped their productivity. Now, e-mail users, marketers and mailing list operators are more worried that spam filters are blocking out too many wanted messages.

AOL isn't the only company to face charges that it improperly blocks legitimate messages. But, as the world's largest ISP for years, it has long borne the brunt of complaints from mass e-mailers over the problem.

Those concerns are seeping into the debate over a planned AOL program, set to go live in the next month, in which approved e-mail senders pay to guarantee delivery of their messages.

The web-based reality series will run across several sites on the AOL network, including AOL.com, AIM.com, Moviefone.com, and MapQuest.com. Challengers will be able to hunt for clues across the sites and look for hidden treasure buried across the United States.

The clues and the online reality show will also be promoted on television, print, and cell phones. Mr. Burnett said he was amazed by the number of fans who communicated online about his TV series.

He believes that with more people able to watch content on their computers during the daytime, the hours from 9 a.m. to 5 p.m. could become the equivalent of the next prime time on the TV programming schedule.

Gold Rush! will begin with 13 trucks containing solid gold, burying 13 caches of lucre around the United States, according to Mr. Burnett in an interview Tuesday. Clues regarding the whereabouts of those caches will be embedded online through the AOL web sites and other media.

The AOL job cuts, which fall in line with similar cuts made periodically over the last few years, reflect a dropping user base that has been driven by a number of factors, Grey Consulting founder and principal analyst Maurene Caplan Grey told the E-Commerce Times.

The analyst, who doubted increased user savvy was behind the cuts, indicated a recent instant messaging deal for interoperability between Microsoft and Yahoo may have also contributed to the job cuts, and further subscriber loss is likely to increase the chances of an acquisition.

Grey added that, although its user base is dropping, AOL still retains a substantial subscriber base of millions, which may be attractive, particularly to the ever-expanding Google.

In a few short years, users can expect to make telephone calls for free, with no per-minute charges, as part of a package of services through which carriers make money on advertising or transaction fees, eBay's chief executive said on Wednesday.

Seeking to justify eBay's $4 billion purchase last week of Web-based communications phenomenon Skype Technologies, Meg Whitman countered criticism by a financial analyst during the company's quarterly conference call by agreeing with some of his points.

"The percentage of users that you can actually charge for (phone services) will actually go down, so I actually agree with that and we understood that when we looked at Skype," Whitman said in responding to the analyst's question.

"In the end, the price that anyone can provide for voice transmission on the 'Net will trend toward zero," eBay's top executive said.

AOL Spyware Protection 2.0 (ASP 2.0) is powered by Computer Associates eTrust PestPatrol Anti-Spyware technology and finds and blocks up to 28,000 different types of adware, spyware, Trojans and keyloggers.

Every minute, the software scans for thousands of types of spyware and adware that may be running silently, as well as every 15 minutes, daily and weekly in various memory and system sweeps aimed at keeping systems spyware- free.

"Spyware and adware threats are growing more significant as users spend more time online and visit more malicious or infected Web sites, so we want to offer our members the most comprehensive possible protection against those new and emerging threats," Andrew Weinstein, AOL spokesperson, told internetnews.com.

Microsoft is in talks with Time Warner over the sale of AOL or a business partnership, the New York Post reported Thursday. Details of the discussions are murky, but the two companies appear to be discussing a wide array of possibilities, including combining efforts in Internet searching, instant messaging and online advertising, according to the Associated Press

While speculation centered on Microsoft buying all or pieces of AOL, the New York Times reported that Microsoft offered to sell its Internet division to Yahoo and AOL so it could focus on Web searching. The offers ultimately spurred the ongoing discussions with AOL.

Microsoft and AOL declined to comment on the reports.

An alliance between the two companies could result in an even more formidable competitor to Google and Yahoo, both of which have strong head starts over their peers in search technology and online advertising.

One of the most elaborate proposal under discussion would involve combining America Online with the MSN Internet portal and dial-up Internet business, creating the world's largest Internet company. The venture's Web search would be provided by Microsoft. A combination along those lines would be a significant blow to Google, which provides the Web search on AOL's services. This year, 11 percent of Google's revenue came from advertising it placed on AOL sites.

A combination of AOL and MSN would have 18 percent of the search market in the United States, according to Nielsen NetRatings, making it third after Google, with 46 percent, and Yahoo with 23 percent.

Google based its software on open standards, so it will work with smaller networks that are based on the same technology. Text messages can be exchanged with users of Apple Computer Inc.'s iChat, Cerulean Studios' Trillian and the open-source Gaim program.

Google also is inviting programmers to build its technology into their software.

"It means other people and developers will be able to add value to our network by being able to add this to computer games, productivity applications and anywhere else they want," said Georges Harik, director of product management at Google.

The new Google program features a basic user interface with few graphics, much like the main Google search site. It does not spawn pop-up windows or display ads like America Online's Instant Messenger.

To date, Revolution has spent roughly $145 million in the health and wellness field, buying controlling stakes in Miraval -- Life in Balance, a Tucson, Ariz., resort and spa company, and Wisdom Media Group Inc., a radio and television company focused on health and wellness that was recently relaunched under the name Lime: Healthy Living With a Twist.

Lime has 6.5 million cable subscribers, a Web site and a 24-hour channel on Sirius Satellite Radio. It plans to roll out wireless alerts consisting of reminders and daily inspirations, said chief executive C.J. Kettler. As part of Revolution's deal with Gaiam, Gaiam will provide programming to Lime and produce videos of Lime shows.

AOL said Xdrive would continue to serve existing customers. Xdrive manages an online storage platform that lets subscribers access and protect their digital assets, such as music and video, from any location. It offers users storage safety and security and automatic backup, AOL said.

Rival Internet companies are touting online storage offerings designed to let subscribers store anything they want in secure servers. AOL has also been showing interest in expanded storage for its members.

Among the five major search sites -- Google Inc., Yahoo Inc., MSN, America Online Inc. and Ask Jeeves Inc. -- Yahoo and Ask Jeeves were cited for making their headings fainter and their disclosure statements harder to find.

"If you want to call attention to something on a page you put headline above it, [but] you don't make it smaller and more faint," said Beau Brendler, director of Consumer Reports WebWatch.

Yahoo also received the most criticism about its paid inclusion program, since it is the only engine among the top five to still use the practice, and because one way it charges included sites is based on the number of clicks on their listings.

Time Warner (TWX ) has decided that it's go-for-broke time at AOL, as the beleaguered online division launches a last-ditch gamble for survival. To generate growth even as its Internet service loses subscribers, the online company is launching one of the most radical strategic shifts in years -- throwing open its content for free in a bid to cash in on a gusher of online-ad revenues.

The refurbished aol.com is taking a different approach than the other big portals, such as Yahoo! (YHOO ) and Microsoft's (MSFT ) MSN, which hit their stride before broadband usage took off. AOL's site, to launch in July, will put streaming video and audio content front and center -- including exclusive live concerts, celebrity interviews, and film shorts.

America Online, with 28 million members, has assigned a full-time employee to handle next-of-kin requests. Before releasing account information, the company requires a copy of the death certificate and documentation proving the person requesting the e-mail information is the legal beneficiary or the estate representative, said America Online spokesman Nicholas Graham.

MSN Hotmail will provide account contents on CDs or floppy disks to relatives of deceased members after it verifies the legitimacy of the request, said Brooke Richardson, MSN lead product manager, in a statement. ``We have tried to institute a policy that is very focused on privacy, but at the same time honors the requests of bereaved family members.''

After Lance Cpl. Justin Ellsworth of Michigan was killed Nov. 13 while inspecting a bomb in Iraq, his father, John Ellsworth, wanted access to his son's Yahoo email account. But Yahoo, whose policy is to terminate email accounts upon a user's death, would not give him the material until a probate judge ordered the Sunnyvale company to do so.

Danny O'Brien of the Electronic Frontier Foundation, a San Francisco non-profit that often gets involved in digital-privacy issues, said it's difficult to find the right balance between personal privacy and a family's desire to get all of a loved one's possessions.

``We are sympathetic to the pain families go through,'' he said. ``On the other hand, there are a lot of things people want to keep private from their close relatives. You need to have some way to do that.''

Analysts said the risk is that AOL may accelerate the steady decline in its subscriber base by causing more people to stop paying for content and services since they will be able to get them for free. "Maybe this will cause the access business to wind down faster before the advertising business picks up," warned David Card, an analyst with Jupiter Research.