Free AOL Gaining Customers

Posted on September 19, 2006

Reuters reports that Time Warner claims its AOL service is gaining customers, including new customers, following the offering of free services to broadband customers.

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.

AOL's strategy may succeed but they will need to make their email software easier to use online. The current web-based email technology from AOL makes it too difficult to display a current list of all of one's email messages. AOL needs to focus on improving their web-based features to compete with Yahoo Mail and Gmail.

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