This announcement from Time Warner Inc, AOL's parent company, follows job cuts earlier in the year when the online giant AOL announced the restructure of the business to focus on online advertising and broadband subscriptions instead of dial-up subscriptions.
By shifting focus to new broadband initiatives and the provision of free content, AOL is attempting to catch up with competitors such as Yahoo! and Google who have been providing free email and content for years.
AOL has said it will give away email accounts and other internet services such as parental-control and security tools. AOL anticipate that free access to exclusive content such as TV clips and celebrity news will attract users and advertisers. It is a risky strategy that relies on advertising instead of subscriptions to support the company as millions of dial-up users cancel their subscriptions and jump to high-speed broadband connections.
"Now we offer AOL services for free, there is no reason for anyone to leave AOL," said Jeffrey Bewkes, Time Warner Inc president and chief operating officer.
AOL's subscriber base has dropped by almost ten million dollars since 2002, a loss of nearly one million US subscribers. The company is cutting costs by ending its marketing efforts to sign up new subscribers. The majority of jobs to go are marketing and subscriber related roles in the US.
More cost cuts are expected to follow in Europe where AOL is negotiating the sale of its dial-up business to European telecommunication companies. Jon Millar, AOL chief executive told analysts that AOL has similar plans to sell its business in Britain and Germany.
The plans to sell its UK business are at odds with announcements from AOL UK in March this year about the expansion of its paid services team. AOL UK has also recently launched a new broadband offer that is cheaper than their existing dial-up package.
The shift in usage from dial-up to broadband began over five years ago. AOL built their subscription service in the 90's to help the public access the internet via dial-up. As more and more people upgrade to broadband AOL are late in joining the race and face strong competition for advertising revenue from major players Yahoo!, Google and MSN.
