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AOL magic 5? 5GB free storage, 5000 less jobs

Has AOL hit its magic number?
Written by Donna Bogatin, Contributor on
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AOL’ s dramatic reversal of its business model this week provides a mini case-study in American business: cater to the customer, but employ at-will.

The AOL one-two punch is draconian in what it is giving away, and what it is taking away.

GIVING-AWAY: “Time Warner Announces that AOL Will Offer Its Software, E-mail and Many Other Products for Free to Broadband Users; Will Enhance Growth of AOL’s Advertising Business”

Time Warner President and Chief Operating Officer Jeff Bewkes said:

For the first time in AOL’s history, we’re offering many of AOL’s most compelling products, such as its integrated software and e-mail as well as applications for safety and security including parental controls, to broadband users free of charge. We’ve listened to our customers, and many of them want to keep using these AOL products when they migrate to broadband – but not pay extra for them. So now we can tell them: ‘You’ve Got Mail – for Free.’ This is the next logical step for AOL to capitalize further on the explosive rise in broadband usage and online advertising. With its robust and rapidly expanding advertising operation, we expect to put AOL back on a growth path.

The company announced:

In the weeks ahead, AOL will announce a number of free new products in such areas as safety and security, storage, personalized e-mail domains, video and search, as well as an update of its AOL software. Combined with AOL’s video search, video assets, compelling content, blogging and other existing free applications, these new products will allow AOL to compete across the board for new Internet users, both domestically and abroad.

Through growing AOL’s already substantial audience – as well as its advertising inventory – AOL will continue to build its extensive advertising capabilities. The AOL Network has the second-largest domestic online audience and is now the third-largest online advertising network in the U.S. In the second quarter, AOL’s advertising revenue grew 40% year over year.

TAKING-AWAY: AOL chief executive Jon Miller told AOL's worldwide workforce of 19,000 people that about 5,000 employees would within six months likely no longer be with the company, according to Washington Post reports:

An executive with the firm said several hundred of the 4,700 jobs in Northern Virginia would be affected, and that some employees had already been granted paid leave to look for new employment. Several employees said the news was expected, and people who worked for certain divisions knew for weeks that they were likely to lose their jobs.

ALSO SEE: AOL subscribers view more pages, see more ads and AOL moves to pure advertising model, what about shareholder Google?

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