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AOL to Offer Free Content in Ad Boost Bid

June 8, 2005

NEW YORK (Reuters) — Hoping for a bigger piece of the fast-growing online advertising pie, America online this month will unveil a revamped AOL.com Web site, offering for free many of the features once available only to its paying subscribers, the Wall Street Journal reported on Wednesday.

AOL, which became the Internet’s biggest business by charging people a monthly subscription fee for its service, also told the newspaper it is looking to stem mounting customer defections.

Nearly as many people visit AOL and its affiliated Web sites, such as Mapquest and Netscape, as Yahoo and its affiliated sites. But last year, AOL’s sites had $1 billion in ad sales while most of Yahoo’s $3.6 billion in revenue came from advertising. Google Inc’s ad revenue was $3.2 billion.

AOL hopes its new free portal will attract higher advertising rates, the report said.

“It’s a strong market and we need to take share,” Jonathan Miller, AOL’s chief executive, told the Journal.

The move is a sharp reversal of the strategy AOL adopted in 2002 and would put the Time Warner Inc. unit in direct competition with Yahoo, Google and Microsoft Corp.’s MSN, which offer free Internet portals with popular search capabilities.

AOL believes its new portal will have an edge over the competition because it is designed for use specifically by people connected through high-speed Internet services, the newspaper said, adding it will feature flashy graphics and full-motion video that cannot be easily used by slow dial-up Internet customers.

AOL’s U.S. subscriber base has fallen to 22 million from 26 million in the past two years, as customers have moved to high-speed Internet services that AOL was slow to offer, the report said.

“If you’re going to be late to the game, it’s got to be as good or better,” Ted Leonsis, AOL’s vice chairman, told the Journal.

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