Time Warner Inc. opened the gates of its America Online properties to the Canadian masses yesterday, acknowledging that its subscription-based service for Internet content has not been able to keep pace with the advertising-driven models of other portals.
AOL Canada Inc., a unit of the giant media company, launched a freely accessible Web portal at aol.ca designed to compete with the on-line partnerships between BCE Inc. and Microsoft Canada Co. -- known as Sympatico.MSN.ca -- and between Rogers Cable Inc. and Yahoo Inc.
The revamped AOL site offers videos, music, news and other features that were previously available only to subscribers.
With the move, AOL is hoping to compete for the bubbling fortune in advertising dollars being reaped today by the mainstream portals, principally MSN, Yahoo and Google Inc.
AOL executives committed to the idea after the company's advertising partners assured them that there was still room in the portal market for another major player, said Craig Wallace, president and chief executive officer of AOL Canada.
The move is a key, strategic new direction for the company, he added. "The AOL portal today, quite frankly, is nothing more than a marketing play."
The decision is timely for AOL. This month, as Google's shares surged above $300 (U.S.), the seven-year-old Google surpassed the venerable Time Warner as the world's most valuable media company. Google posted quarterly profit of $369-million on sales of $1.3-billion, meaning that its advertising revenue now exceeds that of many of the largest newspaper publishers.
AOL now hopes to strengthen its two main revenue streams, derived from ads placed on each Web page and from companies who pay to have their names associated with search results. The company also receives a smaller amount of revenue in the form of subscription fees.
U.S. advertisers spent more than $140-billion last year, according to TNS Media Intelligence, a research arm of Britain's Taylor Nelson Sofres PLC. About $8.4-billion of that went on-line, with $2.6-billion going to search-related ads, according to Jupiter Research.
AOL's new mass market approach will roll out globally, with changes to the U.S. site planned for next month. AOL Canada is promising its users specially tailored content that is "uniquely Canadian." About 20 per cent of news content, for example, will come from Canadian partners, although the company admits it does not have a partnership with any of the large Canadian media outlets. The remainder of the news content will come from U.S. outlets, such as CNN, a division of Time Warner.
"We have the ability to pump out very differentiated content," Mr. Wallace said.
AOL Canada will continue to sell subscription-based services that include dial-up and high-speed Internet access, as well as security features, such as anti-virus software, spyware protection, identity theft protection, parental controls and 24-hour customer service.
While the company's monthly rates of $25 (Canadian) to $45 are competitive with those of some telephone and cable companies, AOL Canada has been at a disadvantage because it doesn't have television and phone services to bundle at discounted prices with Internet access.