February 21, 2006

America Online is set to launch important new services over the next few months to help it better compete in key Internet markets.

AOL's move is targeting competing sites MySpace, voice powerhouse Skype and others, CEO Jonathan Miller said in an interview.

Some of AOL's plans, such as building a MySpace-style network onto AOL's market-leading instant messaging service, have not previously been made public.

AOL is trying to keep pace with chief rivals Google, Yahoo and Microsoft as it shifts from a subscriber model to an advertising strategy, Miller says: "Job One is to make sure we're part of that group."

What's coming:

Shows include Welcome Back Kotter, Kung Fu and Battlestar Galactica. Truveo will allow users to search for specifics, such as guest appearances by Brad Pitt.

• AIM-ing at MySpace. AOL's No. 1 instant-messaging service — AIM — has 43 million active users. AOL will use that clout, and AOL's substantial music and video offerings, to compete with the red-hot MySpace, owned by News Corp. It should roll out in about eight weeks, AOL says.

So many people have AIM and use its popular Buddy Lists to chat with others that "the barrier to getting people to use it would be very low," Miller says. Clicking on a name in a Buddy List, for instance, could take you directly to that person's personal website.

"It makes perfect sense," says Charlene Li, analyst at Forrester Research. "The key is making a strong link with AOL Music. Part of the reason MySpace works so well is it has music."

• Phone calls. Miller says AIM "will be a full voice platform — competitive with Skype."

Google's and Yahoo's instant messengers already offer voice. But tech analysts say AIM would quickly become a force in cheap Internet phone calling — a market now led by eBay-owned Skype. The service should roll out in late spring.

Miller also plans to open AIM to outside software developers. They might, for instance, create a tool to finally allow its users to chat with users of other messaging services.

AOL has long talked about using AIM as a hub, says David Card, analyst at Jupiter Research. But as AOL struggles to win respect and ad dollars, he says, executives "just need to do it."

Parent Time Warner said AOL revenue fell 8% in the fourth quarter to $2 billion despite higher ad sales.

It lost 625,000 subscribers in the quarter; it had 19.5 million U.S. members in 2005.

Source: USA Today

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