$40M Campaign Pushes 'Next AOL'

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America Online Inc. launched a massive marketing offensive this week that will include mass-mailing millions of CD-ROMs to members and potential members, continuing a marketing approach that helped make it the world's leading Internet service.


Over the next three months, AOL, Dulles, VA, plans to send copies of its new AOL 4.0 software as the main thrust of the campaign. Members and nonmembers will receive the updated, soon-to-be-almost ubiquitous software, touted as "The Next AOL." Other discs will appear with consumer products, in magazines and at bank kiosks and restaurants. Distribution of the CD-ROMs will run at 1 million a week.


Additionally, the company is kicking off a wider advertising program that includes television, radio and print elements and online promotions. A NASCAR racer and an AOL balloon will tour the country through the fall and winter promoting the software. Gotham Inc., New York, is the agency running the campaign, which has been reported at $40 million. An AOL spokeswoman said she was unable to comment on the budget for the push.


AOL is talking up new features on the software, including improved e-mail, an integrated toolbar and easier installation and access. In designing the product, it analyzed the top 50 problems reported by members when calling customer service and surveyed members and nonmembers online, over the phone and in person for their opinions on how to improve the service.


AOL 4.0 already accounts for more than half of member usage time on the service.


Separately, AOL last week reported income of $7.1 million for its fiscal fourth quarter, which includes one-time charges. That number reverses a loss of $11.8 million in the comparable period a year ago. Excluding one-time charges, earnings for the quarter hit $57.3 million on revenue of $792.3 million. The company's earnings report was delayed while it was in discussions with the Securities and Exchange Commission about its accounting treatments for two acquisitions.


For the fiscal year, AOL earned $91.8 million, compared with a loss of $499.3 million in fiscal 1997. Before charges and on a fully-taxed basis, the full year's income rose to $134 million, with revenue at $2.6 billion. The company pointed to increases in its advertising, service and commerce revenue figures to account for the overall boost in its top line.


The company reported fourth-quarter noncash charges of $60.5 million related to research and development in connection with its acquisition of the assets of Mirabilis Ltd., plus $10 million related to the company's acquisition of NetChannel Inc. and another $17.7 million connected to a legal settlement.


AOL added 3.9 million people to its membership rolls in fiscal 1998, an improvement over growth of 2.4 million members the previous year. The company said its service reached 12.5 million members worldwide as of June 30, 1998. Its purchase of CompuServe, which ended the year with about 2 million members, closed in the third quarter.


In an indication of its momentum going forward, AOL's backlog of advertising and commerce contract revenue stood at $510.5 million as of June 30, up from $180 million at the same time last year

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