"They were the last of the old model," Rob Enderle, principal analyst of Enderle Group in Silicon Valley, said of the company that started out as America Online in the dot-com glory days.

"When the old market collapsed, it kind of collapsed around AOL. We were just counting the days to when it would shut down or get a clue, and it got a clue."

US media and entertainment giant Time Warner said it would stop charging broadband users for e-mail and multimedia services as part of a drive to revamp its struggling AOL unit.

Online portals Yahoo, Google, and Microsoft MSN have enhanced e-mail and other free services during the past year in a fierce competition for devotees whose online visits can be converted into advertising revenue.

"For search and online community sites, the ad model is what carries it," Enderle said. "Yahoo and Google are all ad driven and they are the most successful. AOL is kind of the last gasp of the old model."

US customers have been deserting AOL's traditional dial-up Internet service in favour of the much faster speeds offered by broadband.

More than three million users dropped the service in the quarter ended June 30, according to an earnings report which also showed AOL's subscription revenues fell 11 percent in the three-month period.

AOL said it would continue its dial-up subscription service, but no longer spend money on attracting new members or retaining existing ones, according to David Card, a senior analyst at Jupiter Research in New York.

"This is another step in a strategy that AOL has been working on for several years," Card told AFP. "AOL invented the business model, and it was a very good model in the old days."

AOL has long been in the online advertising business, ranking as one of four US Internet firms that take in half of the money spent on Internet ads, according to Card.

The online advertising market's growth during the past two years rendered the subscription model obsolete, analysts said.

"Neither Yahoo nor Google have that kind of barrier to entry, and MSN gets thrown in that mix," Northern California Jupiter analyst Sapna Satagopan said, referring to subscriber fees.

"AOL has a lot of users it could potentially reach with search-based ads."

Investors highlighted the importance of "click ads," advertisements that generate revenue only when users click on the Internet link, with their reactions to recent earnings reports by Google and Yahoo.

Google was a stock market darling with news that its second-quarter earnings more than doubled as online advertising revenues rocketed 78 percent to 2.46 billion dollars.

Yahoo met earnings expectations but its stock price plunged nearly 22 percent after it revealed that it was delaying the launch of an improved advertising platform.

The increasing use of online advertising to target customers put pressure on traditional advertising vehicles such as newspapers, magazines and television, analysts said.

"The online method of connecting buyers and sellers is far more efficient," Enderle said.

"The last report I saw, spending was shifting from the old model to the new model."

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