AOL Offers Free Services in Pursuit of Ad Money

Posted on August 7, 2006

AOL LogoIn a dramatic switch AOL is freeing up some of its services so that it can garner more advertising revenues. People who already have broadband access can now get AOL for free. AOL will still charge for its dial-up service. NBC News reports that AOL has lost nearly 8 million subscribers over the past four years.

Jonathan Miller, AOL's chairman and CEO tells NBC News that customers were leaving AOL over price. He says, "They weren't leaving us because they were unhappy."

AOL recorded a 40% boost in ad revenue in the second quarter. The company believes that by making some of its services free it will prevent its users from defecting to the growing number of other Internet service providers. This may be true to some extent but they will still have to compete technologically with services from Google and Yahoo.

This may be the only way for AOL to retain some of its email and instant messenger customers. That alone makes it a smart move. You can read a long post about AOL's changes by AOL executive Ted Leonsis (post no longer available).