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AOL Connects VoIP Service To AIM

One version of AIM Phoneline, due this month, is an ad-supported free service for making PC-to-PC calls. For-fee options will also be available for calls to landlines.

Antone Gonsalves

May 11, 2006

4 Min Read

AOL plans to launch a PC-based Internet telephone service closely tied to its AIM instant messaging service, a move that would expand the Web portal's options for advertisers.

AIM Phoneline, due this month, would be available as an ad-supported free service for making PC-to-PC calls. While also being able to receive calls from traditional phones, users would have to join the paid service in order to make calls to a landline or wireless network.

AIM Phoneline is another example of AOL attempting to leverage its large instant-messaging user base to launch new ad-supported services. AOL leads the U.S. instant messaging market with 41.6 million subscribers. In comparison, Yahoo, which has the second largest network, has less than half the subscribers of AIM at 19.1 million, according to web metrics firm ComScore Networks. MSN has 14.1 million subscribers.

John McKinley, president of digital services and chief technology officer for AOL, said the company plans to make money from Phoneline through search-related advertising, as well as display ads. Initially, subscribers can click on an ad to call the sponsor. Later this year, AOL will provide an ad-supported directory service for looking up businesses and residential numbers.

Besides ads, AOL also plans to sell ring tones and service packages that would include routing of incoming calls to mobile phones or voicemail access via an 800 telephone number.

AOL's challenge, however, will be in convincing AIM subscribers to use the service, which has lots of competitors, including voice over Internet protocol, providers Vonage and Skype and portal rivals Microsoft MSN and Yahoo. U.S. consumers have yet to show any interest in making calls through a headset attached to a computer, Joe Laszlo, analyst for JupiterResearch, said.

"It's an interesting feature add on to the AIM product," Laszlo said. "But we have yet to see a significant amount of consumer demand for taking calls on the PC. I don't expect AOL to suddenly convert AIM users to Phoneline users overnight." The PC, after all, is not a great substitute for a traditional phone, Laszlo said. Computers are more difficult to operate and people often like to turn them off when not in use, which means they won't be receiving calls unless they pay to have them routed to their cellular phones.

Nevertheless, "being tied to AIM may encourage consumers to give the service a try," Laszlo said. "They're making it as easy as possible to encourage people to give it a shot."

AOL has made the signup process for Phoneline simple, and the software easy to use, McKinley said. In addition, the company is setting itself apart from competitors by including the ability to receive calls from traditional phones or cellular phones in the free service. Other Internet telephony services, such as Skype, charges for all communications other than between PCs.

AOL is also offering a free local telephone number, which a subscriber can choose to keep even when they move to another city, and voicemail that's accessible through the PC. Subscribers can also receive and send text messages to mobile phones.

The paid service, called AIM Phoneline Unlimited, is expected to cost $9.95 a month for a limited time. Beyond the intro period, the service would cost $14.95 a month. AOL believes the paid service would be attractive to home and small businesses, particularly people selling on EBay Inc. or doing some other form of e-commerce.

AOL Phoneline would be available in the top 50 U.S. metropolitan areas, covering 80 percent of the nation's population, AOL said. Partner Broadwing Communications LLC would run the VoIP infrastructure.

Phoneline is not AOL's first entry into Internet telephony. The portal currently offers a PC-to-PC voice service in beta over its recently released AIM client Triton, which would be used with Phoneline. The latter service would replace the beta service. AOL also offers a home phone service called TotalTalk, which enables a person to use a traditional telephone to make and receive calls. The service starts at $18.99 a month.

AOL, MSN and Yahoo are interested in VoIP because of the technology's ability to provide a single communication platform for voicemail, email and instant messaging. Besides building customer loyalty, the platform could be integrated with other services, such as local search, online music stores and social networking, and greatly increase the portals' offerings for advertisers.

Meanwhile, AOL on Wednesday said it plans to announce in a few weeks a professional version of AIM that's meant to attract businesses. The instant messaging service would include tight integration with Microsoft's email client Outlook, and the online conferencing service from WebEx Communications Inc.

In addition, AOL launched AIM Pages, which enable subscribers to build profile pages that can be shared with other AIM users through their contact lists. AOL expects to eventually build AIM Pages into a social network around AIM, which the company expects to continue using as a springboard for other projects.

"Expect us to continue to play offense (in the market) as we expand the franchise," McKinley said.

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