A stark reality check for AOL:
After peaking at 26.7 million U.S. subscribers in September 2002, AOL's subscription base dropped 30% to 18.6 million in March. Because AOL's rivals, including Google Inc., Yahoo Inc. and Microsoft Corp., offer free email, customers would have kept dropping paid subscriptions even if AOL.com email remained a premium offering. By making such accounts free, AOL could at least try to persuade customers to watch an ad-supported video or two as they check their mail.
Advertising, though a relatively small part of AOL's revenue, saw a 40% boost in the second quarter, while the unit's overall revenue declined 2%. During the quarter, AOl's subscriber rolls fell an additional 976,000 to 17.7 milllion.
Source: WSJ.com - Time Warner Swings to a Profit, Announces Major Shift at AOL
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