America Online said Monday it will add an online video portal as it continues to cast about for a business formula to recapture ground lost by its dwindling dial-up business.

Like Google and YouTube, two of the leaders in the online video market, AOL will carry a combination of both free and paid-for content on its site, which will be launched this week.

The site is a relaunch that will solicit uploaded video from individual video makers, a feature that has driven the popularity of sites such as YouTube.

Shares of AOL’s parent company, Time Warner, rose $0.06 to $16.39 in recent trading.

The new video service is an about-face from AOL’s initial attempt at online video.

In March, AOL debuted In2TV, a broadband television service, which delved into the extensive database of old TV series from sibling Warner Brothers.

The service launched back in March with shows ranging from Welcome Back, Kotter, and Chico and the Man to Lois and Clark (see AOL Airs TV Repeats).

No New Ideas

The new site will include more than 40 channels including MTV, Comedy Central, Nickelodeon, the History Channel, and the WNBA.

But the site will also allow users to upload their own videos à la YouTube.

“This is a clear signal that AOL has lost its one-time status as an innovator,” said Peter Gorham, an independent industry analyst. “AOL is no longer nurturing new ideas. It is looking for ideas that are already successful elsewhere and adopting them.”

In its heyday AOL introduced the average PC owner to the Internet. The company gave the Internet an overlay that made it more easily navigable to the non-technophile.

“It was the Internet on training wheels, but the company seems to have lost its drive for innovation,” said Mr. Gorham.

“It has gotten to the point where it is difficult to define exactly what AOL is. Is it an ISP, a portal, or something else?” he asked.

Dying Dial-up

The company is attempting to replace revenue lost from its dying dial-up business on the fly, and it seems to be casting about for successful business formulas. Its latest foray is into the field of online video.

Online video, which started primarily as a vehicle for adolescent, lowbrow content, is starting to evolve as a platform for creative contributions from a growing talent pool.

Recently a failed TV pilot, Nobody’s Watching, found life after network failure on YouTube. More than 300,000 people watched Nobody’s Watching on YouTube. The sitcom is now being picked up by NBC.

“YouTube is rapidly becoming a secondary distribution venue for content that did not make the cut at the networks,” said Mr. Gorham. “It’s new media meeting old media.”