AOL is set to report second-quarter earnings on Aug. 2--and analysts expect comparable declines to its 800,000 first-quarter subscriber exodus. That underscores the gradual, inevitable decline of
AOL's Internet service business. The company is in a quandary about what to do moving forward: Dial-up continues to die, but slowly enough that AOL still makes most of its money from the fading
service. However, the same day that Time Warner is expected to announce more subscriber churn, it is also expected to announce changes that will hasten the end of its paid subscriber revenue source.
This move follows a proposal to Time Warner's board of directors from AOL CEO Jonathan Miller. He is urging the company to take its ISP business off life-support, so it can fully shift its focus to
ad-supported online services. Skeptics say it is yet another example of AOL arriving late to the party; it has made several efforts to be more Yahoo- and MSN-like throughout the years. The ad-revenue
shift is more than a year old, and the company is already seeing it pay off. Ad revenue is up, and traffic is up--but that still only counts for about 15 to 20 percent of the company's revenue from
2005. Like Microsoft, a painful transition period will likely ensue.
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