With all that success, however, has come a predicament. AOL needs to innovate, but it fears it can't change things too much lest it offend its members. So the giant of cyberspace moves cautiously.

That balancing act is evident in AOL's release this week of new software, version 5.0, which I've been testing for weeks. Overall, this is a good product, with a number of useful new features. I recommend it wholeheartedly. But the new release fails to improve on a couple of AOL's big weaknesses, in personalization and e-mail, because internal research showed members might be miffed by too much change in these areas.

You can tell you've got the new software right away. AOL 5.0, which is a free upgrade, now sports a larger opening screen that combines the former "welcome screen" and the channel screen. Channels now run down the left-hand side of this unified screen, and you can add links to up to five of your favorite places on AOL in a strip at the right side of the screen. This is a better design.

The two biggest new features are an online calendar and a photo-delivery service, both prominently displayed on the new opening screen. The calendar allows you to keep your appointments on AOL's servers, so you can access them from any PC with AOL software. It also informs you of various events taking place in your area, like concerts, so you can add these to your calendar if you like. The feature works OK, but it's no match for traditional computer calendar programs, and it's a little slow on dial-up modems.

Much more interesting is "You've Got Pictures," a joint service with Kodak. It allows anybody, including people who don't have digital cameras, to get photos into a PC for printing, editing, e-mailing or use on Web sites. When you take your film in for processing at any of tens of thousands of stores, you just check off an AOL box on the envelope and pay about $6 extra.

The film processor then uploads your photos to AOL, in addition to providing you with the usual prints. The next time you log on, AOL announces that "You've Got Pictures" in the same voice it uses for the famed "You've Got Mail" greeting.

You can download the photos and share them with other people even if they don't have AOL. You can also order professional reprints, or T-shirts, mugs and the like bearing the photo. Similar services have existed on the Web, but AOL's presentation and integration of this one are much more appealing.

Both the photo and calendar features are also available to users of the older 4.0 version of AOL. That's because these features, and others AOL plans over time, will be housed on the company's servers, not in the software on your hard disk.

Some of the other nice features available only in AOL 5.0 include the ability to retrieve accidentally deleted e-mail for 24 hours, and the ability to create canned signatures that you can add to outgoing e-mail. With 5.0, each AOL account can now have seven screen names instead of five, and each screen name can be 16 letters long instead of 10 (the longer names are also available on AOL 4.0). There's also a new search engine that can find things both inside AOL and out on the Web. And the new software can automatically detect whether you have a high-speed connection. If you do, you'll get a menu of special high-speed features, like video clips.

But AOL's cautious approach has left some weaknesses. For instance, the e-mail address book is brain-dead. Unlike any other major e-mail program, AOL won't automatically insert addresses after you type a few characters. There's also no way to sort mail automatically so you can find messages easily.

Another weakness is personalization. From AOL's opening screen, you have to go two levels down to find your personal stock quotes, or news headlines on topics you follow, or scores for your favorite sports teams. Services like My Yahoo place these all right up front, where you can find them at a glance.

I believe that these sorts of more sophisticated features add value even for casual, nontechnical users, and that including them as options wouldn't violate AOL's traditional focus on simplicity, which I've long applauded.

AOL may be forced to pay attention to some of these things, because its competition is finally showing some signs of life. At Microsoft, the failed MSN online service, which has just two million members, is being reinvigorated. The company is serious again about selling Internet access. It has beefed up its search and community features, and is planning a new, easy-to-use software release. Like AOL, Microsoft is even planning to roll out information appliances so people who don't use PCs can get its service.

And EarthLink, newly merged with MindSpring, now has three million members and is planning its own simple software, with integrated e-mail. That will make it a potential threat to the leader as well.

AOL has done a pretty good job with version 5.0, but it's going to have to figure out a way to do even more, without violating its mission or unsettling its members.

(www.ptech.wsj.com)