In a bid to staunch their staggeringly high rate of customer loss (reported to have been 850,000 in the first quarter of 2006!) America On Line [1] is, according to the Washington Post [2], considering allowing broadband consumers to use AOL for free (dial-up customers will, however, still be taking it in the shorts).
AOL plans to more than make up the revenue loss (estimated at $2B) from customers switching to free accounts (an expected 8M of them out of a base of 26.5M) through advertising presumably based upon a rapid expansion of the number of accounts and associated eyeballs available to show ads to.
This is a potentially disruptive initiative that might affect the Internet advertising world for a few months and redraw the lines between the major players.
We can be pretty certain that if AOL gets its promotion of the free service right (and that is a big "if") then there will be a honeymoon of a few months as a surge in AOL clients happens and then a tapering off and subsequent user base attrition as AOL subscribers are lured away by competing services. After all, what can AOL offer in the way of e-mail, news, and social networking that hasn't been done more effectively by scores of other services.
That said, AOL does tie all those services together in an easy-to-use-if-you-like-that-kind-of-thing offering that new and naive users have bought in to so it may be that the sheep don't stray from the fold over the mid-term.
But in the long term, if AOL doesn't radically rethink its platform and services the next generations of Internet users won't bother with their services.
My money is on tough times ahead for AOL.
Links:
[1] http://www.aol.com
[2] http://www.washingtonpost.com/wp-dyn/content/article/2006/07/06/AR2006070600154.html