Will AOL Finally Go Free?

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AOL has been building up to this moment since last July, when it made the AOL.com site free. Since then, it has begun offering several new services to attract more nonsubscribing visitors, launching TMZ.com an entertainment site, and buying Weblogs, a blog network. The new In2TV service offers hundreds of free episodes of old TV shows like Wonder Woman and Growing Pains. All that free content helped lead to a 26% growth in AOL's advertising revenue for the first quarter of 2006, which totaled $392 million. During the same period, Google's ad revenue grew 79%, to $2.25 billion.

"AOL is trying to rationalize its existence," says Drew Neisser, CEO of Renegade Marketing Group, a new media advertising firm in New York City. "If it weren't for IM-ing and inertia, it would probably be in even deeper trouble." The question facing AOL, he says, is whether the Web needs another general aggregator or whether the market is moving toward more specialized sites like YouTube and MySpace.

Jon Rosen, a former AOL executive who is now a senior vice president of Autobytel, a car site, says there's wisdom in AOL's portal plan--if executed properly. "If you get more unique users, that translates to more page views, which translates into more advertising," he says. It might be the right approach; it also might be too late.