Earlier this week, AOL announced a departure from their subscription based revenue model. They plan to make cash by selling ad space. In fact, AOL is betting that they can make more money from advertising than from subscriptions.

Right now, their slice of the online advertising market is relatively healthy ($295 Million Q2 vs Yahoo!’s $637 Million and Google’s $953 Million for Q2). They want more. The online advertising market is expected to be valued at 16 billion dollars this year. If things go right, this could be huge for them.

This is a smart strategy for three reasons: (1) more users, more market share, more revenue, (2) no subscriptions, no subscription management, no support, (3) everyone else is doing it!

However, AOL needs to find a way to appeal to the younger generations. For example, late teens associate AOL with AIM, not content. So, it doesn’t matter if they are charging for content or giving it away, some people will simply not go to AOL looking for content. They need to fix that if this new strategy is going to work.

What’s really going on here is an industry wide movement: offer something engaging enough to make people visit, stay, click and comeback. The radio industry did it back in the day, The Wall Street Journal website started giving content away back in 2004, and MTV recently signed a deal with Google to distribute clips with ads.

Give it away, and they will come (and while they are there show them some ads, so that you can pay your bills).