AOL hopes 8.0 is its lucky number

America Online quietly releases the latest version of its online service, aiming to reverse its sagging fortunes. Meanwhile, Microsoft readies an MSN upgrade.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
4 min read
America Online has quietly released the latest version of its popular online service, which the company hopes will be the jolt it needs to reverse its sagging fortunes.

AOL 8.0 is now available within the online company's proprietary service. Subscribers can download the new software by typing "upgrade" into the AOL keyword box, causing a window to pop up to walk people through the process.

AOL, a division of media giant AOL Time Warner, is planning to officially launch the upgrade next Tuesday in New York City. The splashy event will be hosted by comedian Dana Carvey in Lincoln Center's Avery Fisher Hall and will feature a musical performance by pop singer Alanis Morissette. The company has enlisted 2,000 AOL members to participate.

The release of AOL 8.0 comes as Microsoft prepares to launch MSN 8 on Oct. 24, also in New York. The battle of the "eights" coincides with both companies facing tough transitions. AOL, for example, lags behind Microsoft in moving to higher-speed broadband access, which could be crucial to wooing more customers.

"Microsoft is doing a better job than AOL on pulling together all the pieces necessary to make the most out of broadband," said Gartner analyst Paul-Jon McNealy.

AOL has been losing subscribers to rival broadband services, even as the dial-up access market, where it dominates, is reaching saturation. But broadband is also costly to offer and portends lower margins for AOL; in the long run, it could mean declining earnings for the company.

The AOL upgrade has been touted as "the most important product introduction" by AOL CEO Jonathan Miller. Company executives have been hyping version 8.0 as the foundation of a new strategy to offer exclusive programming and services. Executives have compared AOL's new strategic focus on its programming to television networks and premium cable channels such as Home Box Office.

AOL under fire
Since the launch of AOL 7.0 last year, the online giant has come under fire. Its management has been replaced by a new breed of executives bent on rekindling the service to its former glory. Meanwhile, an ongoing investigation by the Securities and Exchange Commission continues to be AOL's biggest headache.

AOL and MSN vie for clicks
The SEC investigation has put the spotlight on AOL's accounting of revenue over the past two years, and it has fueled an internal coup against AOL executives such as Robert Pittman and Steve Case. Pittman left AOL in July, and some large shareholders such as AOL Time Warner vice chairman Ted Turner are reportedly trying to oust Case, the company's chairman.

MSN is coming under the microscope too. Wall Street will start taking a hard look at the division next Thursday, when Microsoft fully discloses its performance for the first time. For more than seven years, MSN has been a money-losing operation for the company, which has led to some resentment among employees of other, profitable Microsoft divisions. Some people refer to MSN as being on the "red side" of Microsoft's Redmond, Wash., campus.

"The public eye will be on MSN more than it was before, and they're getting tremendous pressure from inside the company," said Jupiter Research analyst David Card. "It's a tough place to work. They don't suffer fools or underperformers."

On the other hand, he said, "I think it will turn out that they're pretty close to profitability."

MSN 8 sports a bunch of new goodies--new parental controls, sophisticated spam filtering and software features from Microsoft Money and Encarta, among other things--that the technology titan hopes will woo new users. Microsoft also plans to offer new Web services and software enhancements to paying customers only, in its quest for profits.

Microsoft also is taking a reverse tack in its battle with AOL for dominance in instant messaging. AOL's standalone instant messenger offers more robust features than those found in AOL 8.0. Microsoft, by contrast, is adding features to MSN Messenger 5 that will be available to MSN 8 subscribers and not those using the standalone version.

Still, AOL's lead over MSN is enormous, and not just as measured by the number of users--35 million for AOL, compared with 8.7 million for the Microsoft service. AOL accounts for more than 25 percent of the time people spend on the Internet vs. about 9 percent for MSN, according to Jupiter Research.

AOL's "market share dominance is phenomenal," Card said.

New features
Despite the company's bold rhetoric, AOL 8.0 has maintained the general look and feel of its predecessor. The most noticeable new feature is a small, translucent toolbar that informs people about incoming e-mails and instant messages when their AOL window is closed.

The toolbar, called AOL Companion, can be expanded to include a drop-down menu to change screen names or to sign out of AOL. There's also folding menu that opens a scrolling list of features, including links to a Web search engine, horoscopes, weather, maps, news and a dictionary.

AOL has also added another level of customization to 8.0. When signing in, users are immediately asked to choose from a selection of six welcome screens that vary slightly in color and design schemes.

Those screens all have similar navigation properties, with a weather box on the upper-left corner, top news stories at the top center, a section for online deals and opinion polls under the news section, a horizontal bar with broadband features on the bottom, and a list of "Quick Clicks" that link to tools and content such as news, sports scores and music videos.

AOL executives claim that version 8.0 will become the foundation on which to build exclusive programming for its members. Executives have been touting a number of initiatives from its music division, such as listening parties for unreleased albums and Sessions@AOL, in which video of in-studio performances by major recording artists is streamed to AOL members.