AOL's dark secret
- Added:
- Mar 18, 2005
In January rumours started to circulate that AOL UK was in the midst of
a significant reorganisation. The strategy appears to have shifted away
from behaving like a media and Internet access company towards one
nicknamed internally as "Products and Services".
The move implies that AOL will effectively give up its past emphasis on media and content in favour of producing software tools, combined with Internet access, to become a kind of "BT with bells on".
The reasoning is simple. Despite being the world's largest Internet service provider, AOL has been losing subscribers in recent years. In the US alone it lost about 2 million subscribers last year.
It needs a way out.
And the route is not through yet more content and shopping "channels" - way of the old AOL.
In fact, one well-placed source inside AOL told Netimperative: "The basic idea seems to be to 'pool' production rather than have separate teams looking after each channel like news or motoring".
The move betrays a shift away from content towards service-style software tools.
Privately, AOL UK is understood to be seriously concerned that swathes of subscribers to its broadband service are simply using the broadband access without ever touching the AOL service. And what would be the point of producing content that is hardly ever seen?
The trouble is that with AOL's proprietary service still a few steps away from the wider content on the Web, AOL users are voting with their feet and going straight out onto the wider Internet and the tools it offers. Although they can use Google inside the service, AOL's hackneyed "walled garden" approach of old is proving, in the age of broadband, to be a dinosaur-sized albatross around the Internet giant's neck. It must either address this with broadband-oriented products or watch its audiencewither.
Indeed, another source said that "the portal content will be downgraded as they concentrate more on becoming a utility (ie: phone + broadband) with Skype-like features."
AOL has made clear its excitement about its own version of Skype, the Voice over IP Internet telephony product from the makers of KaZaa which has taken the online world by storm.
Internet giants like AOL have watched with some jealously as the tiny Skype has grown from nothing to serving 29 million PC users, adding 155,000 users a day. Skype even claims to have 1.3 million Pocket PC users.
The success has lead Motorola to integrate Skype software into a number of its new wireless devices, while Siemens has launched a dongle which runs Skype on Siemens' DECT phones.
So it was that this week AOL launched a consumer VoIP application in the US to go head-to-head with traditional telecos and cable firms - and catch some of Skype's heat.
AOL CEO Jonathan Miller, announcing it, said the new product would be "a truly differentiated product" and would initially target "specific markets and AOL users."
Quite how that translates to an application that will work in the UK and across Europe remains to be seen.
It's also fair to say that the average UK punter has absolutely no idea what VoIP actually is. A company with the marketing muscle and "hand-holding" approach of AOL is in theory ideally placed to walk a new consumer through the process of making calls over the Internet.
Miller went further, saying, that “AOL aims to closely integrate the VoIP service with AOL's popular email and IM service to create a sort of "communications dashboard."
The story emerging Stateside is that AOL customers will simply unplug from the likes of BT and plug their phones into their AOL broadband modems.
Once online, an AOL instant messaging session would turn into a phone call simply by typing the phrase "Can I Call?"
Other AOL products almost certain to make their way over here at some point include streaming music to mobile phones, and a tool to allow users to swap photos held on their AOL area via mobile and IM. And AOL's MapQuest unit, almost unknown in the UK but dominant in the US, is being lined-up to make use of the Global Postioning System to send maps to mobiles running AOL software. Similar deals are in the offing in Europe.
"Products and services" may not be AOL's whole new story, however.
This week the company's said its online advertising revenue will grow faster than the overall industry in 2005, past the projected 20 to 25 percent average growth for the U.S. online ad industry.
It's for this reason that the upcoming relaunch of its AOL.com Web site - expected in the early second half of this year - is already being trailed a way for AOL to break out of its walled garden and take the fight back to the Web. But note the location: AOL in the US has a surer foothold compared to the Google-obsessed Brits and Europeans, who also remain wedded to former state telcos like BT.
Meanwhile, the "products, services and tools" strategy is not by any means copyright to AOL.
Last week France Telecom-owned Wanadoo announced a voice over broadband service where for £4 a month, calls to UK landlines over evenings and weekends would be cheaper than BT, and virtually free to other Wanadoo customers.
But it's not all plain sailing. Wanadoo's VoIP service in France, launched last year, became a laughing stock due to technical problems.
Not to be left out, Yahoo!, partnered with BT in the UK, already offers a VoIP service as an an add-on to Yahoo Instant Messenger. Calls between BT users are free, but relatively expensive for outside calls. The service is understood to be picking up.
Yahoo!'s own "products" strategy extended this week to the world of blogs and online social networking. The free “Yahoo 360” service - due for a full launch on March 29 - will allow users to create and share content with their social network, and integrate with other Yahoo! services. The service will perform a Google-esque beta version invitation-only launch.
As the Internet market matures, the old ways of making a buck are changing. While the search market, chiefly in the shape of Google, has become the repository of the growth of online advertising via the all-powerful keyword-targeted ad, the big online media giants are finding they need to offer, well, more stuff.
Software applications, spread across broadband to the desktop and eventually mobile, seem to be the kind of "stuff" they want.
The move implies that AOL will effectively give up its past emphasis on media and content in favour of producing software tools, combined with Internet access, to become a kind of "BT with bells on".
The reasoning is simple. Despite being the world's largest Internet service provider, AOL has been losing subscribers in recent years. In the US alone it lost about 2 million subscribers last year.
It needs a way out.
And the route is not through yet more content and shopping "channels" - way of the old AOL.
In fact, one well-placed source inside AOL told Netimperative: "The basic idea seems to be to 'pool' production rather than have separate teams looking after each channel like news or motoring".
The move betrays a shift away from content towards service-style software tools.
Privately, AOL UK is understood to be seriously concerned that swathes of subscribers to its broadband service are simply using the broadband access without ever touching the AOL service. And what would be the point of producing content that is hardly ever seen?
The trouble is that with AOL's proprietary service still a few steps away from the wider content on the Web, AOL users are voting with their feet and going straight out onto the wider Internet and the tools it offers. Although they can use Google inside the service, AOL's hackneyed "walled garden" approach of old is proving, in the age of broadband, to be a dinosaur-sized albatross around the Internet giant's neck. It must either address this with broadband-oriented products or watch its audiencewither.
Indeed, another source said that "the portal content will be downgraded as they concentrate more on becoming a utility (ie: phone + broadband) with Skype-like features."
AOL has made clear its excitement about its own version of Skype, the Voice over IP Internet telephony product from the makers of KaZaa which has taken the online world by storm.
Internet giants like AOL have watched with some jealously as the tiny Skype has grown from nothing to serving 29 million PC users, adding 155,000 users a day. Skype even claims to have 1.3 million Pocket PC users.
The success has lead Motorola to integrate Skype software into a number of its new wireless devices, while Siemens has launched a dongle which runs Skype on Siemens' DECT phones.
So it was that this week AOL launched a consumer VoIP application in the US to go head-to-head with traditional telecos and cable firms - and catch some of Skype's heat.
AOL CEO Jonathan Miller, announcing it, said the new product would be "a truly differentiated product" and would initially target "specific markets and AOL users."
Quite how that translates to an application that will work in the UK and across Europe remains to be seen.
It's also fair to say that the average UK punter has absolutely no idea what VoIP actually is. A company with the marketing muscle and "hand-holding" approach of AOL is in theory ideally placed to walk a new consumer through the process of making calls over the Internet.
Miller went further, saying, that “AOL aims to closely integrate the VoIP service with AOL's popular email and IM service to create a sort of "communications dashboard."
The story emerging Stateside is that AOL customers will simply unplug from the likes of BT and plug their phones into their AOL broadband modems.
Once online, an AOL instant messaging session would turn into a phone call simply by typing the phrase "Can I Call?"
Other AOL products almost certain to make their way over here at some point include streaming music to mobile phones, and a tool to allow users to swap photos held on their AOL area via mobile and IM. And AOL's MapQuest unit, almost unknown in the UK but dominant in the US, is being lined-up to make use of the Global Postioning System to send maps to mobiles running AOL software. Similar deals are in the offing in Europe.
"Products and services" may not be AOL's whole new story, however.
This week the company's said its online advertising revenue will grow faster than the overall industry in 2005, past the projected 20 to 25 percent average growth for the U.S. online ad industry.
It's for this reason that the upcoming relaunch of its AOL.com Web site - expected in the early second half of this year - is already being trailed a way for AOL to break out of its walled garden and take the fight back to the Web. But note the location: AOL in the US has a surer foothold compared to the Google-obsessed Brits and Europeans, who also remain wedded to former state telcos like BT.
Meanwhile, the "products, services and tools" strategy is not by any means copyright to AOL.
Last week France Telecom-owned Wanadoo announced a voice over broadband service where for £4 a month, calls to UK landlines over evenings and weekends would be cheaper than BT, and virtually free to other Wanadoo customers.
But it's not all plain sailing. Wanadoo's VoIP service in France, launched last year, became a laughing stock due to technical problems.
Not to be left out, Yahoo!, partnered with BT in the UK, already offers a VoIP service as an an add-on to Yahoo Instant Messenger. Calls between BT users are free, but relatively expensive for outside calls. The service is understood to be picking up.
Yahoo!'s own "products" strategy extended this week to the world of blogs and online social networking. The free “Yahoo 360” service - due for a full launch on March 29 - will allow users to create and share content with their social network, and integrate with other Yahoo! services. The service will perform a Google-esque beta version invitation-only launch.
As the Internet market matures, the old ways of making a buck are changing. While the search market, chiefly in the shape of Google, has become the repository of the growth of online advertising via the all-powerful keyword-targeted ad, the big online media giants are finding they need to offer, well, more stuff.
Software applications, spread across broadband to the desktop and eventually mobile, seem to be the kind of "stuff" they want.
