After losing nearly a million subscribers last year, AOL is pulling out all the stops to win back some of those wayward users and gain traction with a new generation of surfers. And its fledgling KOL and KOL Jr. kids services may be one tentpole strategy that’s doing the trick. Since the services went live in September 2003, AOL’s traffic has increased by a whopping 150%.

Featuring reams of exclusive content from well-known kids brands, KOL and KOL Jr. have replaced the seven-year-old Kids Only Channel, a small off-shoot of the regular AOL service that consistently ranked among the top on-line destinations for kids despite its less-than-robust presence and breadth.

Since the new services are available free to users with the latest AOL software (9.0 Optimized), most of the revenue for KOL will initially be coming from corporate sponsors and strategic revenue-sharing models set up with content partners.

A closer-to-ideal model would see regular, non-AOL Internet users fork out extra cash to access KOL and KOL Jr.’s services, but the market may not be quite there yet; a recent Jupiter survey indicates that less than 5% of users would be willing to do so. And as KOL is primarily a dial-up service and some of its content requires the power of a broadband connection, the effectiveness of this new service may get lost in the translation.

Despite these hurdles, AOL feels that kids groups are a motherlode just waiting to be mined. According to a recent America Online/Digital Marketing Services survey, 46% of kids jump on-line at least four times a week, and nearly 20% log on every day. Malcolm Bird, senior VP and GM of AOL’s kids and teen areas, says there are currently 3.3 million households with kids under 12 on AOL’s subscription list.

KOL was just a glimmer in AOL’s mind until January 2003, when Bird began pre-launch testing with the goal of creating a ‘cool place’ for kids to come and hang out. In addition to Bird and his team ‘thinking like kids,’ four kid-testers were brought in to try out the site, and Bird claims that much of KOLs current content was fine-tuned by their suggestions. In fact, Bird still solicits weekly feedback reports from kids about what’s working and what’s not.

The sites are designed specifically to appeal to kids in the coveted six to 12 and preschool demos. KOL draws from a wealth of content available under the Time Warner banner, including kid-friendly versions of Time and Sports Illustrated and branded content from Kids’ WB! and Cartoon Network that spans games, activities and episode guides for kids’ favorite shows.

KOL boasts two original on-line animated series from Animation Collective – Princess Natasha, about a girl doing double duty as a spy and a princess; and Kung Fu Academy, which stars a boy who thinks he’s on an Asian dream vacation, but is actually training in a martial arts school. Last but not least, the site’s interactive radio show, hosted by Rick Adams, attracts more than a million listeners each week.

To date, KOL’s only non-Time Warner content comes from Mary-Kate and Ashley, which it’s using to reach the upper end of its target demo. KOL Jr., meanwhile, gets some outside help from Sesame Workshop, which is providing entertaining and educational content designed to mesh with the site’s musical pop-up book format that’s easy for two- to six-year-olds to navigate. Bird is on the hunt for new content and programming that can build habitual creative interaction and keep kids coming back again and again.