Time Warner Inc. on Tuesday said a strategy to offer most of online unit AOL’s services for free was making faster-than-expected progress in attracting new Internet users and cutting costs.
Jeffrey Bewkes, Time Warner’s chief operating officer, told investors at a Goldman Sachs media conference that its strategy had attracted new users beyond those who were once paying customers of the online service.
Some 40 percent of new users were not former subscribers, Bewkes said. “That means there is demand for AOL beyond the existing base,” he said.
In addition, subscribers who formerly paid for AOL services were moving to its free services at a quicker rate than originally predicted by AOL management, Bewkes said.
Bewkes said advertising sales at AOL were “very robust,” without elaborating.
Advertising growth would be unlikely to offset a drop in subscription revenue for another year or two but is a more profitable source of revenue, he said.
In August, AOL said it aimed to boost its online advertising sales by attracting more users to its services including e-mail, instant messaging and online video by offering most of its services at no charge.
It continues to maintain a dial-up Internet access business, but it no longer plans to market the service.
AOL, once the reigning king of online services, had lost millions of paying subscribers over the last few years as subscribers defected to providers that offered faster speeds.
“People weren’t leaving AOL because they didn’t like it; they were leaving because they wanted to go to (high-speed) broadband,” Bewkes said.
By offering it for free, former subscribers who had already relinquished their e-mail accounts are offered an opportunity to come back and reclaim old e-mail addresses.