August 23, 2002 12:15 PM PDT

Week in review: AOL all over

When the going gets tough, the tough turn to...Jennifer Love Hewitt?

Borrowing a page from broadcast TV, online giant America Online is hoping some celebrity saviors can make its content more compelling, with the goal of attracting and retaining more paying subscribers.

In one recent example, the unit of AOL Time Warner offered the first peek at actress Hewitt's debut music video, "BareNaked." For other features, AOL is sifting through the vast music resources of Time Warner for exclusive content.

Subscriber growth at AOL--which is also battling investigations into its finances and a wickedly slow advertising market--has slowed dramatically. Just 492,000 new customers signed up last quarter, compared with the 1.3 million who were added during the same period last year.

Subscriber satisfaction also has been ebbing. On Monday, the University of Michigan released its latest American Customer Satisfaction Index, and AOL scored 59 out of a possible 100, the lowest of all companies measured in the Web portal category. Competitor Yahoo received 76, and MSN scored 72.

One of gripes AOL users have had is the rampant use of pop-up ads. In response, AOL earlier this year cut back on sales of pop-ups, but it is now embarking on a new style of attention-grabbing promotions.

On Sept. 1, the company will feature so-called rich media ads throughout member pages--a move that was previously inhibited by technical limitations, despite the rising popularity of rich media.

Such ads will contain advanced sound and motion through streaming media, Macromedia's Flash animation or comparable technology. They appear in all shapes and sizes, including expandable banners, pop-up ads, and promotions that float over a page, also known as "screen stealers."

With the new ads, AOL is hoping to reverse some dismal numbers: In the second quarter, advertising and commerce revenue fell 42 percent, a deeper decline from the previous quarter's 31 percent drop.

In other AOL Time Warner news, the company said this week it will spin off its cable unit as a separate company later this year and will offer broadband service over AT&T Comcast's cable systems.

The deal also gives AT&T a way out of its partnership in Time Warner Entertainment. The new company, to be called Time Warner Cable, will be formed from Time Warner Entertainment's existing cable properties and from additional cable properties to be contributed by AOL Time Warner.

Oh, and we almost forgot: The investigations into the company's dubious accounting during the dot-com heyday are continuing. Most recently, some experts said investigators are likely to cast a wider net in search of inappropriate insider stock sales and misleading financial statements.

Gamers gain new battlegrounds
Microsoft played up features of its upcoming online service for the Xbox gaming console, Xbox Live. John O'Rourke, worldwide marketing director for Xbox, said the service will include voice chat in every game, allowing players to "trash talk" each other as they participate in multiplayer games over a broadband Internet connection.

Yet a few Xbox fans are grumbling over a missed opportunity to participate in beta tests for Xbox Live. According to Microsoft, more than 100,000 Xbox owners applied for the chance to tap into online versions of "NFL Fever" and racing game "Re-Volt." Problem is, only 5,000 beta testing spots were available. Microsoft said it was pleased with the overwhelming interest, yet many fans were disappointed with how the software giant handled the event. Xbox Live will be released officially Nov. 15.

In other gaming news, a new cell phone from Samsung lets owners play games or access phone book listings even when the phone is turned off. Called "airplane mode," the new feature gives owners a way to use a cell phone while on an airplane without breaking federal regulations that require all phones to be turned off during a flight.

The sales rush for gaming consoles, after an initial price cut across the board for some of the most popular gaming machines, seems to have slowed somewhat, according to numbers from market researcher NPDFunworld. NPD figures show that average weekly sales of consoles in the United States dropped to 316,000 units in July, from 403,000 units per week in June. Analysts, however, said that the July sales drop was smaller than expected.

Software savvy
Apple Computer on Saturday will officially release its update to OS X, code-named Jaguar. The date, interestingly enough, coincides with the seventh anniversary of the day that Microsoft presented Windows 95 to the world in the most extravagant product kickoff in computing history. Apple hopes to make a little history of its own with software it sees as capable of wooing Windows users to the Mac.

But that goal may not be an easy one to reach. In too many ways, analysts say, Mac OS X 10.2 plays catch-up with XP, the current version of Windows. Apple also faces challenges from new Microsoft products on the horizon, such as Windows XP Media Center Edition, around which Hewlett-Packard and other PC makers plan to create computer hybrids chock-full of digital and multimedia features.

Software maker Borland also has its eyes on Microsoft, with a set of programming tools that allow software developers to build software for Microsoft's Windows operating system and its overarching .Net software strategy. Borland's suite of tools, code-named Galileo, will be positioned to compete against Microsoft's Visual Studio.Net, the company said. Borland is hoping to position itself as an alternative for developers who want to target .Net, but who do not want to be locked into Microsoft's programming tools and technologies.

Separately, Microsoft this week said it plans to revamp Visual Studio.Net to work with new products that are expected to ship in the coming months. Those products include Windows.Net Server, the next version of Microsoft's server operating system, and an upcoming release of the company's SQL Server database, code-named Yukon.

Want Office XP for cheap? Microsoft offers an academic version of the software package for students and teachers, but sales show many nonstudents are grabbing the discounted version for themselves. In some cases, the software is priced $330 less than the same nonacademic version of Office XP. Microsoft wouldn't say whether the academic promotion was meant to push overall sales of Office XP, but analysts said the strategy was obvious.

"It's pretty clear Microsoft wants more penetration in the consumer market, which is one reason they took the product out of the traditional educational reseller market," said Steve Koenig, an analyst at market research firm NPDTechworld.

Also of note
Microsoft will finally take the plunge and offer a Macintosh version of its MSN Internet service, although the service won't be available until early next year...File-swapping company StreamCast released its long-awaited version of Morpheus. Many users said an earlier version was far easier to use...Sick of spam? Many junk-mail haters are taking their cases to court to try to wring some cash out of spammers. While the pitfalls are many, returns are few...Dell Computer will begin offering an unbranded, low-priced desktop PC to distributors that cater to small businesses--typically companies with fewer than 100 employees...A trial version of Opera 7 is on its way, but it will resemble its predecessor only in superficial ways. The rendering engine--the heart of the browser, which interprets code pulled down from Web servers--has been rewritten from the ground up over the past 18 months.

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