July 31, 2003 9:23 AM PDT

AOL readies next-generation service

America Online on Friday will begin offering its next-generation online service as part of its effort to rescue itself from plummeting online advertising revenue and a corroding narrowband subscriber base.


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Called AOL 9.0 Optimized, the service will be offered to AOL for Broadband subscribers using Windows 2000 or XP, beginning Friday, a company representative said. AOL will introduce the new service to the rest of its members later this fall.

"No matter how members and their families connect to the AOL service--whether by dial-up or by adding the AOL for Broadband service to a basic high-speed connection--this upgrade will allow each person to create the online world that they want," AOL CEO Jonathan Miller said in a statement.

The launch comes at a low point for the AOL Time Warner Internet division. Last week, AOL reported that its subscriber base declined by 804,000 members from the previous quarter and that online advertising revenue dropped 48 percent from last year.

More troubling were reports Wednesday that the Securities and Exchange Commission asked AOL to turn over documents detailing its bulk-subscription plan with retailers. AOL's program to sell its service to retail partners in bulk for a hefty discount added about 830,000 subscribers to its books between 2001 and 2002. Wall Street analysts and investors based their growth forecasts on AOL's subscriber growth.

Friday's launch also comes as broadband services offered by cable and telephone companies continue to chip away at AOL's 25.4 million U.S. narrowband subscribers. Baby Bells such as SBC Communications and Verizon Communications continue to show gains in their digital subscriber line services, while cable companies such as Comcast and its own Time Warner Cable make stronger inroads into households.

Given its initial target pool, it's no surprise that AOL 9.0 Optimized will try to appeal to broadband users. The release will be an upgrade from its March release of AOL for Broadband, which added a splashier interface and more multimedia features to its existing product. That was also the time AOL launched a $35 million marketing campaign to appeal to subscribers who considered leaving AOL for faster access.

As previously reported, the new service will offer many new features as well as a cosmetic change to its long-standing welcome screen. AOL 9.0 will include new e-mail and instant messaging software features, such as new spam filtering tools for its e-mail box and the ability to share photos and audio files through IM windows.

AOL 9.0 will also come with some exclusive perks that it hopes will give people more reasons to join. The software will be bundled with security features such as firewall and virus protection. Other features such as a cash card from Visa International card for teens and an "accelerator" caching system to speed up Web page downloads will be a part of the package.

Content will play a heightened role in the service as well. The cornerstone of AOL 9.0 will be its exclusive magazine content from its magazine publishing cousin Time, with titles such as People and Entertainment Weekly now offering their articles only on AOL.

From a technology standpoint, AOL 9.0 will mark the first time the online service has supported Apple's QuickTime player, which will be packaged alongside RealNetworks and Microsoft's Windows Media software. However, AOL will play up its own technology by launching its media player developed by its Nullsoft subsidiary, code-named Llama. AOL's in-house-produced streaming media content will be encoded in Nullsoft's audio and video formats, called NSA and NSV respectively.

 

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