• by May 11, 2005

America Online keeps rolling out the freebies as it heads toward what feels like the longest run-up to a launch in history. AOL says it will relaunch AOL.com as a Web-wide portal this fall.

AOL yesterday said it will offer a free e-mail service, like Microsoft's Hotmail and Yahoo!'s free mail, as a companion to its popular instant messaging service (AIM). AOL says it will offer the free e-mail service to some 20 million users of AIM in a test. The service will be supported with advertising.

Meanwhile, as everyone knows, AOL keeps losing paying subscribers who help the company generate cash. The company reported that it lost 2.3 million subscribers in the year ending March 31, 2005 - it now has 21.7 million subscribers. For the first quarter of this year, it lost 549,000 paying customers. AOL's juggling act - trying to keep the cash coming in from paying subscribers, while dancing as fast as it can to launch an advertising-supported Web-wide portal - is a smoke and mirrors kind of play.

AOL once dangled the proposition of exclusive content within its walled garden. Now, it will compete with Google, Yahoo!, and MSN which were always formidable rivals and are now well beyond AOL. After all is said and done, what is AOL now but a collection of Time Inc. content brands? AOL itself remains a great brand but for what purpose? The company still generates cash, some $1 billion in positive cash flow, and we suspect that eventually it will be spun off to the likes of IAC/InterActive Corp.

The bottom line, says one insider intimately familiar with the workings of AOL, says, "The company [Time Warner] cares about cable and cable will be the savior of the Time Warner interactive strategy. AOL is like your rich dowager aunt; she's good for paying for the party, but nobody wants to dance with her long-term."

AOL, the insider goes on to say, "cannot build differentiated content. The company cannot build technology, period. Never could, never has, still can't."

What it can do, is buy strategic relationships. Thank goodness for Advertising.com. Gotta love those folks in Baltimore. "AOL can't sell advertising, but it can buy advertising," the insider says.

Food for thought on this day.