AOL's Advertising Advances

Interesting to see that AOL in the US is reportedly considering offering its online services for free to anyone with high-speed Internet access.

It is an open secret that AOL wants to transform its business into a more advertising led proposition and in a world where free email accounts such as Gmail, Hotmail and Yahoo! Mail are offered by its closest rivals, the company is finally realising that charging for basic online services is not the best model.

Apparently charging for these services accounts for up to 80% of the company’s total revenues. Compare that to Google, which makes nearly 100% of its revenues from advertising and happily offers free email and storage services to users.

It would be a bold move for AOL to take this strategy and it could attract a lot more users that would in turn attract more advertisers, but the transition will have to be handled carefully with the Wall Street Journal predicting the move could cost it about $2bn in revenues.

The UK unit of AOL faces a similar problem. The ongoing sale discussions over its access business will leave it as an advertiser led concern with content at the fore, it will be interesting to see how it pans out both sides of the Atlantic.