Here’s how AOL believes it can turn subscriptions into a growth business

Go ahead and make fun of dial-up all you want. But AOL still thinks it can turn its greatly diminished base of dial-up customers into a source of growth.

During an earnings call yesterday with analysts and journalists, AOL chief executive Tim Armstrong said the company’s membership team is working on an array of products and strategies to increase revenue from a corner of its business that remains its most profitable.

“Over the long term, the trends for this business are quite clear and should continue,” Armstrong said. “That said, declining less is not our long-term goal here and we’ve challenged teams to find avenues of growth through the subscription services.”

The long-term trend Armstrong refers to is the drop in subscribers to its traditional dial-up service, which once exceeded more than 27 million, but have now fallen to 2.2 million in the most recent quarter. Broadband, of course, destroyed this business and sent AOL into a decline it is still trying to stem.

However, for some time now, AOL has been expanding the types of services it provides to dial-up subscribers under the heading of its membership services. Monthly packages cost from $6.99 to $27.99 and include a host of goodies such as additional photo storage space and some number of photo prints each year, anti-virus services from McAfee, membership in the AARP, legal services to help prepare your will, and insurance to repair or replace your computer.

Indeed, when signing up for these services, dial-up is listed as almost an afterthought.

This strategy of lining up services with partners has, for the moment, slowed the rate at which this business is declining. In the most recent earnings released this week, AOL subscriptions reduced its churn to 1.3 percent, about the same rate as it was a year ago.

Meanwhile, tacking on all those extra services has increased the average amount AOL makes from each subscriber by 6 percent in the most recent quarter.

Armstrong says we can expect to see more from its AOL membership division in the coming months, though he didn’t offer specific details on new products.

In part, AOL is cultivating the loyalty of subscribers by carefully managing the remaining base of subscribers and improving customer service. But the company is also testing out new products of its own, as well as exploring additional partnerships that would add to the value of its membership services, and attract new subscribers as well as convince current subscribers to upgrade.

“I think there is a set of things that we have invested in that area, which I think we will this year coming up continue to invest,” Armstrong said.

Of course, most observers focus on AOL’s advertising business. But in 2014, the subscription business generated $606.5 million in revenue for AOL, about 24 percent of its total revenue.

AOL might be fighting the inevitable. But even stabilizing a business that many thought would evaporate just a couple of years ago would be a victory of sorts for Armstrong.