Steep ClimbPointing out the competition AOL faces for subscribers, Leonsis showed analysts a list of the top reasons why members leave the service -- the first time, he said, the company had revealed these reasons in order of performance. The most common reason, he said, was "price/value," another way of saying consumers thought AOL was too expensive compared to the service people could get from other customers.
To address that complaint, AOL is developing a number of ways to distinguish its service, such as the program, announced Tuesday, of offering a CNN video news service to members for free rather than the $4.95-a-month fee already charged to Internet users.Clearly, AOL has much work ahead of it if the premium services are to make a significant contribution to its bottom line. The precursor of the premium strategy is apparently the 2-year-old AOL By Phone, which enables members to access news, email and other services by calling a toll-free number at AOL. The company has 125,000 paying customers for the service, Leonsis said Tuesday. At the list price of $4.95 a month, that translates into about $7.5 million in revenue per year -- no small amount, but hardly enough to fill the holes in the company's advertising sales business. Indeed, for its part, Yahoo! seems to have a jump on AOL, as far as turnarounds go. Though the $950 million in revenue that analysts expect Yahoo! to report for the year is below its peak 2000 revenue of $1.1 billion, it represents a bounceback from 2001 revenue of $717 million. AOL, by contrast, says 2003 will be the year that its advertising revenue bottoms out. AOL appears to have had quicker growth with a more recently introduced service that alerts dial-up AOL customers if they have an incoming phone call. That $3.95-a-month service has 100,000 paying customers, Leonsis said. Next spring, AOL says it will introduce an integrated mail service that will enable members to access their voice mail and email either through the AOL service or via their home telephone number.