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It’s Official – AOL Offers Free Services

After weeks of speculation, Time Warner Inc. – the parent company of American Online – has officially announced that it will now offer many of its services free in order to compete with portals, such as Yahoo, Google and MSN. The company hopes that by eliminating the subscriber fee entirely, that it will attract new customers, retain current subscribers and bring back past subscribers who eliminated their AOL subscription upon making the broadband switch.

In response to this announcement, Jonathan Miller, AOL chairman and CEO stated in a press release issued early this week stated, “We’ll now be able to maintain and deepen our relationship with many more members who are likely to migrate to broadband.”

What’s Free and What’s Not

AOL products will now be available free of change to any individual with an Internet connection. Specific products include: AOL’s integrated software; communications features, such as AOL e-mail, instant messaging, a local phone number with unlimited incoming calls and social networking applications; and safety and security features, such as parental controls.

In the weeks ahead, AOL will announce a number of free new products in such areas as safety and security, storage, personalized e-mail domains, video and search, as well as an update of its AOL software. Combined with AOL’s video search, video assets, compelling content, blogging and other existing free applications, these new products will allow AOL to compete across the board for new Internet users, both domestically and abroad.

AOL dial-up subscribers are still required to pay for Internet connection service. However, the company will no longer aggressively advertise this service. Rather, the company is working diligently to develop new products that will appeal to a younger demographic. Members may continue to subscribe to AOL’s unlimited premium dial-up plan with a monthly price of $25.90 (including such additional features as 50 gigabytes of storage and unlimited premium customer care) or choose from two lower-cost access plans.

Former AOL customers have an even bigger incentive to return to using AOL software, e-mail, instant messaging and other AOL products and services. Subscribers who deactivated their account within the last two years will be able to reactivate their original screen name.

Getting Into the Online Advertising Game

AOL can afford to lose the $26 per month subscriber fee as they change their business model from a subscriber fee-based business to an advertising-supported business. Encouraged by such trends as its 40 percent jump in ad revenue in the second quarter, AOL will continue to chase potential advertising revenue. AOL figures that by making services free, it can prevent users from defecting to other portals, which have offered free, ad-supported e-mail for years.

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