AOL is born again

In another wave of expansion, America Online confirms plans to tap new revenue streams in advertising, online shopping, and private intranets.

3 min read
In another wave of expansion, America Online (AOL) today confirmed plans to tap new revenue streams in advertising, online shopping, and private intranets.

The rollout of the "new" AOL, which company executives refer to as the "Internet and a whole lot more," comes on the day that the company switches from the Nasdaq market to the New York Stock Exchange. The online service hopes the switch will make its stock less volatile and boost revenue. AOL stock was up 2-3/8 to 29-3/8 in midmorning trading.

In a promotion to mark the switch, Pershing Financial, a stock-trading service offered via AOL, is offering commission-free purchases of up to 5,000 shares of AOL stock during the first week of trading.

While AOL has remained the number-one online service with 6.5 million subscribers worldwide, the company has suffered from legal, marketing, and technological setbacks, including its 19-hour outage last month, the longest in online history, and a lawsuit from "junk email" company CyberPromotions.

Today's announcement, outlined last week by CNET, detailed new revenue streams and efforts to attract the 89 percent of the nation's consumers who are not yet online.

But competition will still be stiff from other online services, ISPs, cable-modem services such as @Home, and telephone companies expanding into the Internet market. To deal with that, the company is redefining how it presents itself.

"We recognize that the market has changed rapidly in the past decade since we started the company," AOL chief executive Steve Case said today. "We want to make sure we remain nimble and really reach out to the consumer market that does not yet use any online service."

The new AOL will try to grab more revenue from online shopping, intranets, and advertising than in the past, Case said. "The more we can rev up these new revenue streams, the more flexibility we will have to reinvest in the business, as well as to maximize the profitability of the business," Case said.

For example, AOL sold almost $40 million in advertising in the past 45 days and plans to target consumer companies including Reebok, Starbucks, and Nabisco. "We believe we are selling more advertising than many of the well-known Web providers like Yahoo and Excite combined are selling," Case said.

Online shopping has yet to take off, but Case said it will contribute a significant source of revenue to the company in several years.

AOL also has organized a team of 40 people to form interactive shopping malls within the service. So far, the service has signed up 45 merchants, including Hickory Farms, the Body Shop, and Copeland Sports. AOL executives declined to reveal the "cut" they will receive from these merchants.

The team will relaunch the AOL marketplace channel by the end of the month with programs aimed at making online shopping secure and reliable. The "AOL Guarantee Program," for example, will promise secure credit card transactions. Another, the "Certified Merchants Program," will require merchants to meet 10 requirements before setting up shop, including customer service guidelines.

AOL also plans to take advantage of the growing intranet market. Called PAOLS, (private AOLs) the outsourced intranets are targeted to associations, unions, alumni groups, and businesses.

"We have found a great number of companies interested in deploying [this technology] and making AOL their desktop intranet provider," Mark Walsh, senior vice president of Enterprise Solutions said today.

Today the company said it signed on Hewlett-Packard, Harvard University, and Great West Insurance to create private intranets. (As reported by CNET, a similar deal with the New York Stock Exchange is in the works.)

Other highlights of the new AOL include:
--a major television and print advertising campaign to raise AOL's profile in mainstream America. The slogan: "Come experience the magic."
--a mass mailing of AOL software that will initially offer free access.
--a new online shopping mall to sell $200 million in AOL T-shirts, hats, and other merchandise."

Later this year, AOL is expected to offer other features, such as Internet telephone service for its members.