Encouraged by the enormous success of its latest makeover -- the AOL 4.0 software, which includes dramatic improvements in its Web browser and e-mail -- the online service is planning to move away from its proprietary computer language, dubbed Rainman, and produce content in HTML, the computer code that's the foundation of the Web, according to people familiar with the situation. A new HTML-based environment, being developed as part of AOL's next version tentatively scheduled for late 1999, could potentially bring AOL (NYSE:AOL) millions of dollars in additional advertising revenue as well as make it cheaper for publishing partners to produce content for the service, industry sources say.
It's a move that could further strengthen AOL's dominant position against encroaching Web competition from Yahoo (Nasdaq:YHOO), Excite (Nasdaq:XCIT), MSN and other portal players.(Microsoft owns MSN and is a partner with NBC in MSNBC.)
Today, all AOL content and advertisements are programmed in Rainman, the proprietary software protocol that enables AOL pages to download quickly and without the glitches that often occur on typical Web pages. AOL has long held onto its Rainman system partly because many of its members continue to dial in on slow14.4 modems.
"Any products that we move to in the future will be focused on ease of use and convenience," says AOL spokeswoman Wendy Goldberg, deflecting the question as to whether AOL is abandoning its Rainman protocol.
Product development
Goldberg says all attention at AOL is currently focused on the latest version, 4.0, "the most popular product in the company's history."
Almost 60 percent of all AOL member sessions are conducted on AOL 4.0, according to Goldberg.
She credits "ease of use and convenience" for the popularity of the new software.
In future versions, the AOL system would support HTML pages so that proprietary content within thes ervice could be developed in accordance with Web standards, sources say.
As a result -- because HTML technology lends itself to more complex animation than static Rainman ads and content -- AOL would become as creatively dynamic as a Web site. AOL content partners would be able to use software programs like Java and Shockwave, streaming audio and video within the service. Furthermore, AOL members would experience a more seamless shift from the service to the Web and back, sources say.
Two formats could co-exist
According to those familiar with AOL's plans, existing content produced in Rainman won't become obsolete; it will continue on the service. Certain areas of AOL would remain in Rainman, such as the Welcome Screen and the top pages of channels and sections, for example. "If AOL is moving closer to an HTML-based version,it's a smart tactical move," says Sean Finnegan, interactive media director at J. Walter Thompson, New York. "They'll have everything the Web has been offering for years. It's a nice bridge for them construct."
Rainman is a closed system completely incompatible with the Web and Web ad banners. It has long been criticized by AOL's content providers -- the magazine, television and new media publishers that make up the bulk of what's available on AOL -- and by the interactive advertising community, which has to spend time and money developing special sites and marketing messages in Rainman.
"If you were going to do [an ad campaign] on the Internet and AOL, it could double the cost," says George Decker, creative director at Darwin Digital, the interactive unit of Saatchi & Saatchi Advertising. "And given that the system is basically developed in a box, no one can add to the functionality."
If AOL's advertising were the same as Web banners, "we would instantly be able to reach twice the amount of eyeballs," says Decker.
AOL's advertising and commerce revenues for the third quarter 1998 were $143 million, up from $88 million for the same period last year. Yet despite its commanding market share and its 14 million subscribers, AOL faces growing competition for ad dollars from Internet portals like Yahoo.
"One of AOL's biggest challenges is its proprietary service increasingly looks dated compared to what's going on the Internet," says David Simons, analyst with Digital Video Investments.
"The longer people are around online, the more adventurous they become because of the appearance of URLs everywhere and increased advertising on TV [byInternet companies]. AOL's challenge is keeping subscribers in ad space controlled by AOL," says Simons.
