(Associated Press via NewsEdge) Time Warner's board is expected to review a proposal for its AOL online unit to free up even more services, likely including the vaunted AOL.com email accounts, in hopes of boosting advertising.
Analysts said the strategy was risky, as million of customers would likely drop their paid subscriptions, and AOL would lose hundreds of millions of dollars a year, perhaps even a billion or more, for the promise of an advertising payoff some time in the future.
But AOL has little choice. Its subscription business will keep eroding regardless. Internet advertising, meanwhile, is booming industry-wide, and opportunities abound with ad-supported online video, where AOL is strong.
"It's a risky game they're playing, but it would be riskier not to play," said David Hallerman, a senior analyst with research company eMarketer.
As Americans turned to cable and phone companies for high-speed service, they saw less need to pay AOL simply for the exclusive content, even as the company offered discounts for those who did not need unlimited dial-up access, currently $11 off the $26 monthly fee.
After peaking in September 2002 with 26.7 million US customers, AOL's subscription base plummeted 30% to 18.6 million in March.
Keeping users on the paid service merely risked sacrificing those opportunities forever, said Jeff Lanctot, general manager of aQuantive's Avenue A/Razorfish, an online advertising agency that placed some ads on AOL sites.
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