America Online is returning to its roots with the latest version of its service to be unveiled, focusing on its members rather than advertisers by upgrading popular services such as chat, as the online giant tries to regain momentum.
Shoring up embattled America Online has become a key priority for parent AOL Time Warner Inc. as it faces a sharp slowdown in advertising and subscriber growth, as well as federal probes into its accounting and a management shake-up.
AOL executives have acknowledged the world's largest Internet service provider took its eye off the ball after its merger, focusing more on ad sales than the service. This version is targeted at holding onto subscribers by improving some of its most popular features such as chat and tools that let AOL's 35 million members engage with each other.
Rival Microsoft Corp.'s MSN has not made things any easier. MSN, which has been gaining market share and now has more than 9 million members, unveiled a $300 million campaign to promote its new version to be launched Oct. 24.
AOL's new version has been characterized as key for the turnaround of the world's largest Internet service provider.
"We are focused on more dramatically improving the experience instead of a cross between the experience and advertisers because no one wins in that environment," said David Gang, head of AOL's product development.
The company is now spending more than $100 million on AOL 8.0, its biggest change in years, as it tries to ensure that subscribers do not leave AOL -- even when they move into the high-speed, or broadband, world. Analysts believe AOL's leadership may be challenged as the battle moves to broadband.
Return to roots
AOL has tried to rally its troops, demoralized after the more than 60 percent drop in AOL Time Warner's stock price this year, with signs in AOL's headquarters reading, "We can do it! But we need your help -- download 8.0."
Analysts said AOL's focus on services around its community -- one of its biggest strengths -- and popular features like chat suggest it is returning to what it does best. One feature analysts said could be promising was "MatchChat," which lets members enter the subjects they are interested in and then connect to others who are online who share those interests.
AOL 8.0 also has more personalization, with more buddy icons and the ability to choose six categories for a welcome screen. It has improved e-mail tools to target junk mail and identify e-mail from known senders, as well as given its parental controls "a face-lift." For example, parents will be able to get a report of their children's activities online.
Lots of talk about programming, broadband
To keep its members engaged, America Online has boosted programming efforts with exclusive "first looks" at new music, movies and books. AOL Time Warner Chief Executive Richard Parsons has said America Online should move into a must-have premium service like the company's HBO network, which has gained accolades for hits including "The Sopranos."
The Internet giant is moving to traditional media-like programming with a schedule of recurring shows -- such as a weekly live gossip show and sports wrap-up. It is expanding the formula it used on its music channel, where some of the new programming elements were first unveiled, to other areas such as news, personal finance, sports and travel.
"There are things that people identify with; it brings them in and then they get turned on to other interactive features," said Jim Bankoff, executive vice president of operations at AOL Interactive Services.
On the all-important broadband front, AOL will offer those with a high-speed connection CD-quality radio later in the month. It will also greet them with a welcome screen that has one-click streaming audio and video so users will not have to launch a media player or wait for buffering.
Analysts have been wondering what paid services AOL may offer on top of its service and whether the company will combine its Road Runner high-speed service with AOL's. Hook said there were no plans to combine the two and said she was more focused on creating a strong broadband offering before creating a spate of premium services.
"This is really the first time we have begun to break out a real broadband experience. There are several features that are better on AOL and broadband and we have messaged them as being so," said Lisa Hook, president of AOL Broadband.