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AOL sells airtime to Auto-By-Tel

The popular Web-based car-purchasing program will pay AOL $6 million for the privilege of marketing its service to AOL customers.

America Online (AOL) proved again today that its strategy of charging companies for airtime is working.

AOL today announced that the popular Web-based car-purchasing program Auto-By-Tel will pay AOL $6 million for the privilege of marketing its service to AOL customers.

Auto-by-Tel will have the option of renewing for two more years.

The arrangement marks the third major deal in which companies have given AOL money to gain access to AOL's 8 million customers. Last week online marketing firm CUC International announced that it is paying AOL $50 million for access to its customers. In February Tel-Save announced it is paying $100 million for the same privelege.

Expect these kinds of deals to continue, analysts say.

In other words, Bob Pittman's strategy is working.

Pittman, president and CEO of AOL Networks, has been chanting the mantra "brand name" ever since he arrived in December.

He said a media company must develop critical mass to make it, whether it's a cable company like MTV, which he founded, or an online company. Once it can prove that it has most of the customers, or at least a good portion of them, marketers will flock to it, Pittman has said.

And no matter how much customers complain about poor access, bad email service and poor customer service, AOL still leads the market by several lengths. With 8 million members and growing, nobody else comes close.

When the company went to flat-rate pricing in December, executives said they would be depending much more on revenues other than membership fees. Analysts said then to expect more of these type of deals.

"This is just one of many," said Abhishek Gami, an analyst with Nesbitt Burns Securities. "This is going to be regular operating procedure. I think this is the way other companies will structure deals. You have 8 million people and it's growing faster than other companies. It's about consumers."

Pittman couldn't agree more.

"The Tel-Save deal was the first indication that we were pursuing that strategy," Pittman said. "CUC was the second. What we're beginning to do is leverage the unique size of AOL. The mass market's coming here."