Can AOL keep from fading away?

The once-popular site has undergone several ill-fated transformations and lost a lot of traffic in the process, leading analysts to wonder if it can be salvaged

AOL needs all the Internet traffic it can get, but it is struggling with the fading popularity of, for many years one of the Web's most popular destinations.

AOL doesn't break out how much contributes to its revenue, but calls the property a valuable one. "Netscape has a loyal community of users and is an important part of the AOL Network," an AOL spokeswoman said via e-mail.

Soon, AOL will restore to a traditional Web portal format, 15 months after turning it into a social news site, a change that, instead of boosting the site's popularity, hurt it.

Still, one can't blame AOL for the attempt to give a new lease on life as a Web 2.0 site. Traffic to the site had been on a years-long slide. This begs the question: Will switching back into a portal turn the tide?

With AOL fighting tooth and nail for every online ad dollar, the performance of the once mighty matters.

"If you have a brand that has some cachet or currency and carries recognition, it's logical to use it," said James Goss, a financial analyst with Barrington Research.

Still,'s past glories will not magically draw people back to it. "It's probably not worthwhile to invest heavily on the site unless they have a coherent strategic plan for it," said industry analyst Greg Sterling of Sterling Market Intelligence.

AOL has bet the farm on online advertising as it sheds its old subscription-fee business model. It's a years-long process that continues full-speed ahead with this week's announcement of AOL's plan to move its headquarters to Manhattan and the integration of its ad networks into a single platform.

But with its online ad revenue growth a disappointing 16 percent in the second quarter, AOL could sure use the traffic that used to draw even several years ago.

An examination of's traffic patterns since AOL acquired Netscape Communications in March 1999 for US$4.2 billion tells a story of consistent decline.

As critics have pointed out over the years, this is true not only for the portal but also for the company's other products, in particular its browser.

"AOL has never known what to do with Netscape. They squandered that asset," Sterling said. "Eventually, the bottom dropped out."

In November 1999, had 20.8 million unique visitors in the U.S., reaching close to a third of the country's Internet users, according to comScore.

By December 2003,'s unique visitors had dropped to 18.8 million, and its reach had plummeted to 12.4 percent of the U.S.'s Internet users, according to comScore.

Things kept deteriorating and by January 2005, had little over 17.5 million unique visitors and a reach of 11 percent.

In the next nine months, suffered a massive drop in unique visitors. In October 2005, the portal had 12.9 million unique visitors, and its reach among all Internet users in the U.S. -- 169 million at that point -- had fallen to 8 percent.

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Juan Carlos Perez

IDG News Service
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