Despite denials last week that AOL has an image problem, the world's largest and most aggressive on-line service is beating a hasty retreat from its planned $300 million (#181 million) advertising campaign and diverting $100 million towards adding some muscle to its creaking network.
The company has become a victim of its own marketing success and is cutting back on both TV and magazine advertising. The hope is that less people will join the service, giving the company an opportunity to catch up with demand.
Catching up is vitally important for the company which lost half its capacity a fortnight ago due to "unusually heavy" demand. It was also forced to close down several chat rooms for hours as technicians struggled to cope with demand. The loss of service has prompted more lawsuits as the company's eight million customers grow tired of busy signals and reduced services, caused by an increase of 1.2 million users over the last quarter.
The amount of time users spend on-line has also increased dramatically since the company introduced a "stay on as long as you like" $19.95 a month flat rate in December. AOL users who are used to paying more for using chat rooms and other time-intensive services are now staying on longer.
Steve Case, the company's beleagured CEO, said: "We are well aware of the problems and are working day and night to fix them."
Just one week after our first look at AOL's misfortunes, the strain is beginning to tell. But AOL is taking positive steps to deal with the issues it is facing. Ironic that a company is being taken to court for having such a successful ad campaign.
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