AOL Gives Up The Ghost

The company that dominated dial-up Internet use is coming to grip with the future. As broadband use increases dramatically, AOL has watched subscriptions decline and advertising dollars move to Google, Yahoo, and MSN. Facing approaching irrelevance, AOL has decided to act.

AOL Reinvents

In an effort to compete, AOL is reinventing itself as an open use portal. To date, AOL has always restricted use of its portal to subscribers. No longer. AOL is beta testing a portal that makes services and content available to everyone. If all goes well, the company will launch the service this month.

AOL's Motivation

The growth of broadband use has correlated to the decline of AOL. It is estimated that as many as 20 percent of subscribers have left the service in the last three years. This loss, of course, correlates to a loss of revenues. As a publicly traded company, AOL must act or face a shareholder revolt.

Catch 22?

AOL is playing a dangerous game with the free portal. The company is risking losing more subscribers that have stuck with the company simply because they like the AOL portal. If "You've Got Mail" is now free, why would anyone pay for it? AOL is soon going to provide an answer.

Further complicating matters, AOL faces an extremely difficult transformation. There is a cliché - If it walk like a duck, quacks like a duck and smells like a duck, it's a duck." At its heart, AOL is a dial-up connection company. How likely is it that AOL will smoothly convert into Yahoo, MSN or Google? Time will tell, but one can expect AOL to learn some hard lessons in the transformation.

What It Means For E-Commerce

The AOL development has little direct impact on e-commerce. As time passes, however, the new strategy could significantly impact Google. Google currently supplies search results to AOL and places Google Adwords on the system. As subscribers decrease, you can expect AOL to develop solutions to replace Google. Much like Yahoo did, Google will eventually be booted from the AOL platform. The loss of 20 million AOL users must be causing Google some consternation.

The Internet is a dynamic, evolving platform. The AOL transformation is just another step in the process. Only time will tell if AOL can adapt in the evolutionary process.