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Changes at Netscape Foreshadow AOL's Evolution

AOL LLC, the company that introduced millions of people to the Internet, is poised to transform itself into a free Web portal from a subscription service.
AOL LLC, the company that introduced millions of people to the Internet, is poised to transform itself into a free Web portal from a subscription service. (By Mark Lennihan -- Associated Press)

Analysts have said such a move could cost AOL $1.8 billion in lost subscription fees and could lead to layoffs of hundreds at its Dulles headquarters and call centers around the country. Such details could be addressed after today's Time Warner board meeting.

For both AOL and Netscape, the challenge is to catch up to an Internet that has dramatically changed since the two were in their heyday a decade ago.

The new Netscape is modeled after Digg.com, a Web site popular among the techie crowd that began as a site for tech-related gossip, news and commentary. Users enjoy a lively discussion of the news and take pride in influencing what becomes popular on the site by voting on -- or digg-ing -- items.

Despite the popularity of Digg.com, Calacanis said the vast majority of visitors there do not vote or submit material -- that's handled by a small cadre of loyal users. Netscape must also find a small but active nucleus of users who will constantly feed the site new nuggets and help build a broader following, he said.

So last week, Netscape offered to pay Internet users $1,000 a month to contribute regular, interesting information -- a blog item or a news story from a far corner of the world. It also has employed eight "anchors" who follow up on popular news stories or conduct fact-checking to ensure certain stories are accurate.

"What he's doing is trying to seed [a new online community] by bringing over some other people from other communities," said Amy Gahran, a media consultant and blogger at Contentious.com. "I don't think it's a bad idea. The role of the professional [news] aggregator -- we're going to see that a lot more."

But others involved in online journalism say Netscape's strategy is all wrong. The tech crowd or other small-knit groups may love the idea of voting on news, but it's untested on a mass audience, said Chris Nolan, founder of Spot-on.com, a news site. "When it goes large to the mainstream, [the appeal] tends to weaken," Nolan said.

Calacanis said he expects it will take some time to get Netscape off the ground and that the amount of traffic on the site will likely dip by "double digits" as it works its way through the transition. "I'm satisfied with where we're at. We're getting good stories in the system. We're getting converts," he said, noting that even the negative response has helped drive traffic.

Whether the experiment succeeds or fails, AOL and Netscape had little choice but to try, said tech consultant Rob Enderle. "Odds are against them being successful. But they're a lot better off than staying on the same path."


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