America Online 2011 Annual Report Download - page 10

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Table of Contents
access service subscribers are important users of AOL Properties and engaging both present and former access service subscribers is an important component
of our strategy. In addition, our subscription access service will remain an important source of revenue and cash flow for us in the near term.
In addition to our content, products and services that are available to all online consumers, an AOL-brand access subscription provides members with
dial-up access to the internet and, depending on the applicable price plan, various degrees of enhanced safety and security features, technical support and other
benefits. In addition, we continue to offer internet access services under the CompuServe and Netscape brands.
Our major access service partners are Verizon Communications Inc. (formerly MCI Communications Services, Inc.) and PAETEC iTel LLC
("PAETEC"), which provide us with modem networks and related services for a substantial portion of our subscription access service. We have agreed to
commit a significant portion of our access service subscribers' total dial-up network hours to the Verizon and PAETEC networks. More specifically, 50% of
our total dial-up network hours are presently committed to Verizon, and 25% of our total dial-up network hours are presently committed to PAETEC.
Through take or pay provisions in each agreement, we will incur penalty payments if we fail to dedicate the required percentage of dial-up hours to these
service partners. As of December 31, 2011, we are meeting our volume commitments to each of these service providers. We have agreed to use both the
Verizon and PAETEC networks until December 31, 2014. The agreement with Verizon may be renewed at our option until December 31, 2015, and the
agreement with PAETEC may be renewed at our option for two twelve-month periods. Upon expiration of these agreements, we expect to continue our
relationships with Verizon and PAETEC or enter into agreements with one or more other providers of modem networks and related services.
Our access service subscriber base has declined and is expected to continue to decline as a result of several factors, including the increased availability
of high-speed broadband internet connections, the fact that a significant amount of online content, products and services has been optimized for use with
broadband internet connections, the effects of our strategic shift which essentially eliminated our marketing efforts for our subscription access service and
providing the vast majority of our content, products and services for free. See "Item 1A—Risk Factors—Risks Relating to Our Business—Our focus on our
online advertising-supported business model involves significant risks".
Other Distribution Channels
We also distribute AOL Properties through a variety of other channels, including agreements with manufacturers of digital devices and other consumer
electronics and mobile carriers. AOL also distributes its content, products and services directly to consumers on the open web and through the Apple App
Store. Additional distribution channels include toolbars, widgets, co-branded portals and websites, third-party websites and social networks that link to AOL
Properties. We also utilize search engine marketing and search engine optimization as distribution methods. In addition, we make available open standards
and protocols for use by third-party developers to enhance, promote and distribute AOL Properties.
AOL seeks to make its AOL Properties and original content as well as other products and services available on social networks, whether offered
directly or by means of partnerships with social network operators.
AOL Properties Revenue Generation
We generate advertising revenues from AOL Properties through the sale of display advertising and search and contextual advertising. We offer
advertisers a wide range of capabilities and solutions to effectively deliver advertising and reach targeted audiences across AOL Properties through our
dedicated advertising sales force. The substantial number of unique visitors on AOL Properties allows us to offer advertisers the capability of reaching a broad
and diverse demographic and geographic audience without having to partner with multiple content providers. We seek to provide effective and efficient
advertising solutions utilizing data-driven insights that help advertisers decide how best to engage consumers. We offer advertisers marketing and promotional
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