AOL to Add Free Phone to Instant Messaging Feature

Technology

AOL to Add Free Phone to Instant Messaging Feature


By SAUL HANSELL and JOHN MARKOFF
Published: May 5, 2006

AOL is preparing to offer the 41 million users of its instant messaging system a free phone number that will allow people to call them from regular phones while they are online.
The move is part of a broad effort by AOL � which has been buffeted by defections from its flagship dial-up Internet service � to capitalize on the continued popularity of its decade-old AIM instant message system.

In addition to expanded Internet calling features, AOL also plans to introduce AIM Pages, an effort to compete with MySpace.com, the rapidly growing social networking service. MySpace, which is owned by the News Corporation, gives its 70 million mostly young members a place to post their writings, photographs, favorite music and video clips.

"Our strategy is to protect and extend our instant messaging business," said James P. Bankoff, executive vice president for programming and products at AOL, a unit of Time Warner. "You have to play offense."

The free phone number is a new twist on services that allow calls between regular phones and PC's, an idea made popular by Skype, which is owned by eBay, and copied by others, like Yahoo through its instant message software. As with those services, the new AOL Phoneline service, to be introduced May 16, will allow users to call each other free if both are online, typically using headsets or microphones attached to their computers.

Other services charge about $30 to $40 a year for a telephone number to receive incoming calls, and about 2 cents a minute to place phone calls from a computer to an ordinary telephone line.
AOL will sell outgoing calls only as part of a flat-rate package that costs $14.90 a month for unlimited calling, or at an introductory price of $9.95 a month for people who subscribe when the service starts.

Skype has not taken off in the United States as it has in other countries because telephone rates are much lower here, said John McKinley, the president of AOL's digital services division. Free incoming calls, he said, are more appealing in this country, especially for people who mostly use cellphones but do not want to give their cell number to casual acquaintances.

These people can give the AOL number out freely. They can then receive notifications on their cellphones of new voice mail messages left at their AOL number.

AOL will make phone numbers available in 50 metropolitan areas. The company hopes to profit both from displaying advertisements to users and from the outbound calling charges and additional services, like ring tones and call forwarding.

AOL is joining a growing list of companies that are attacking the traditional telephone market with the aid of the Internet. There are now about five million subscribers to so-called Voice over Internet Protocol, or VoIP, communications services, according to International Data Corporation, a market research firm based in Framingham, Mass. Because cable and Internet companies are aggressively marketing the service, that is expected to increase to about 30 million subscribers by 2009.

"What's really intriguing about this is how cheap and easy some of this stuff is to use," said Will Stofega, research manager for VoIP services at International Data.

The other new piece of AOL's strategy for its AIM network, AIM Pages, hopes to match MySpace in giving users broad flexibility in designing their pages, but it is also meant to be easier to use. AOL has created a series of modules users can place on their pages, including photo albums, buddy lists and other information about themselves and their interests. It offers ways to add content from AOL and its sister Time Warner companies, like AOL music videos and CNN headlines.

But there are also modules for adding material from rival services, including the Flickr photo-sharing site, owned by Yahoo, and videos from the popular video-sharing service YouTube. There will be advertising on users' pages, and marketers will be able to set up their own sites on the service and offer modules for people to include in their pages.

A preview version of the social networking service will be available to AIM users by the end of next week.

Those with some proficiency in Web page design can change any element of the page, as they can on MySpace, and pull in content from other sites. Analysts credit MySpace's design flexibility as one reason it has become more popular than competitors like Friendster.

AIM, which is available as a free download, is still the leading messaging service with 38 percent of the market, followed by Yahoo and Microsoft, according to comScore Networks, a research service. But the market is getting more competitive. Google has introduced Google Talk, and MySpace is developing its own instant message service.

Many MySpace users communicate with friends using AIM, and AOL is hoping they will find AIM Pages easier to use than MySpace. AIM users will see an icon next to the names of people on their buddy lists who have updated their pages.

Analysts who have been briefed on the service said that it had promise for revitalizing AOL in the face of new social-networking rivals.

"There is no question that AIM is a real network," said David Card, vice president and senior analyst at Jupiter Research. "There's life in the old dog yet."
Ken Belson contributed reporting for this article.