US Report: Can free-access ISPs defy gravity?

Daily Newsletters

Sign up to ZDNet UK's daily newsletter.

NEWS
A number of companies have built their business models around this plan and -- almost without exception -- they have gone out of business or suspended operations. The latest to do so are @bigger.net, a California-based ISP, and a Cincinnati-based service called Tritium. "Having a company announce they're going to enter this market is like hearing someone say, with complete confidence, 'I'm going to step out of that fifth floor window and flap my arms, and I'm going to fly, because I've got really strong arms,' " said Charles Ardai, president of free e-mail provider Juno Online Services LP. "You know he's going to hit the sidewalk, but all you can do is watch." Juno has been offering free e-mail service since 1996, using a proprietary e-mail reader and supporting itself mainly by ad sales. But the company charges users for Internet access, and Ardai says he wouldn't dream of it any other way. "You don't have to remain connected to the Net to read e-mail," Ardai said. "It's a much less expensive proposition than full Internet access, two orders of magnitude less expensive. The average Net user spends 25 hours online a month. While our users might spend 25 hours reading their e-mail, they don't spend nearly that much time connected to our network." Companies such as Tritium, @bigger.net, or the newly-launched NetZero give users unlimited, lifetime access to the Internet in exchange for allowing an advertising window to remain on their desktops while they are online. Some of the services, including @bigger.net, charge a one-time access fee to sign up. Experts say that the two major barriers to a viable, free Web-surfing business are infrastructure costs and the difficulties of building a substantial audience base. Free Web services are ubiquitous online, and although few are making money, they're not expected to disappear any time soon. That's because the costs of running a Web business are peanuts compared to the investments an ISP must make in modems, dial-up telephone numbers and customer service representatives, not to mention buying the bandwidth customers will use. Industry analysts say the Internet advertising market is just not big enough to support those kinds of costs. "That business model is, in general, probably not viable," said Shin-pei Tsay, research associate with Giga Information Group. "Because of the way page views are going, the top four sites are getting 75 percent of the advertising money, and the rest is divided up among millions of other sites." Advertisers are expected to spend $1.87 on Web advertising this year, and that figure will grow to $7.7 billion by 2002, according to Jupiter Communications. The theory is that advertisers will pay more to be able to carefully target their ads, and an ISP can offer more comprehensive information about a consumer than any Web site can. But the value of such targeting may depend on a company's ability to sign up a large subscriber base. "Advertisers will pay more to target their ads, assuming they have enough critical mass to slice and dice along geographic or demographic lines," said analyst Chris Charron of Forrester Research Inc. "But if you only have 50,000 subscribers, it's not worth it. ... Advertisers are only going to pay if they get results." Others counter that the number of viewers might not matter so much if advertisers feel they're reaching the right viewers. "When you talk about targeting, you have to look to cable television, and the rise of cable as the definitive success story," said Drew Ianni, analyst for Jupiter Communications. "They don't have a huge reach, but they do offer very targeted viewers. The same can be said for the Internet." Nevertheless, subscribers are what advertisers are willing to pay for, and building a subscriber base is no easy task, if the experiences of @bigger.net or Tritium are any indication. Juno says it has 6 million members; in contrast, @bigger.net had only about 40,000 after nearly two years in operation. "We happened to start early ... and obviously, no matter how fast you grow, you can't get from zero to 6 million users instantly," said Juno's Ardai. "Web sites ... don't have the same kind of scaling concerns, but with an access business, you have to become good at providing access -- it's not easy." Still, some experts say that it may still be possible for a startup to make the free-access model work, if it has the expertise and the funding. "It may be that it just takes 24 to 36 months and takes $10 to $15 million in marketing to get the business working, where the infrastructure is solid, and you're acquiring more customers, and it looks like a good business," said Jupiter's Ianni. Other attempts at free Net access have included J3, a long-distance telecommunications provider in Dover, Delaware; CyberFreeway, based in Silicon Valley; and X-Stream Network, based in the UK.

Post your comment

In order to post a comment you need to be registered and logged in.

You can also log in with Facebook. Log in or create your ZDNet UK account below

  • Login

Will not be displayed with your comment

By signing up for this service, you indicate that you agree to our Terms and Conditions and have read and understood our Privacy Policy. Questions about membership? Find the answers in the Community FAQ

Get ZDNet UK's daily newsletter

Enter your email address to sign up

ZDNet UK Live

Moley

@GrueMaster. I prefer horses for courses rather than one size fits all. I, and I suspect most other computer users, do not really wish to have...

50 minutes ago by Moley on A tale of two distros: Ubuntu and Linux Mint
greycynic

The product that scares me every time I have to use it is the Office 2007 version of Excel. The first bug that I found was applying the median...

54 minutes ago by greycynic on Ten flawed products that derail productivity
GrueMaster

Nice review and very informative. One thing I'd like to add (in reply to whs001's 1st question), the main reason to have the same interface from...

2 hours ago by GrueMaster on A tale of two distros: Ubuntu and Linux Mint
Frederick Wrigley

I'be been using Mint 12 since the RC came out, and I am far more happy with the Cinnamon, the Mate, and, yes (with extensions), theGnome 3...

3 hours ago by Frederick Wrigley via Facebook on A tale of two distros: Ubuntu and Linux Mint
bdantas

Excellent article. One small correction, though--although a fresh installation of Linux Mint 12 will, indeed, provide the user with a version of...

4 hours ago by bdantas on A tale of two distros: Ubuntu and Linux Mint
Alan Ralph

In related news, the ISPs club together to get the members of the Home Affairs Select Committee (ya goofed on that part, ZDNet UK) copies of "The...

4 hours ago by Alan Ralph via Facebook on MPs urge ISPs to take down terrorist material
Alan Ralph

In related news, the ISPs club together to get the members of the Home Affairs Select Committee (ya goofed on that part, ZDNet UK) copies of "The...

4 hours ago by Alan Ralph via Facebook on MPs urge ISPs to take down terrorist material
Moley

For Gnome 2 die-hards, it is possible to add icons to the bottom panel (or top top panel, if you prefer) which provide the exact Gnome 2...

5 hours ago by Moley on A tale of two distros: Ubuntu and Linux Mint
ramwellian

Your comments would seem pretty naive and immature. Your 'solution' appears to be, "gee, let's all just give in to the hackers and give them...

5 hours ago by ramwellian on Cloud computing security: no more oxymoron?
BugStalker

"Interesting thought ... If you installed Win7 as a dual boot on a machine that previously only had Linux, and it wrecked your Linux installation,...

6 hours ago by BugStalker on Windows 7 Declares War on GRUB
whs001

This is an excellent summary of Ubuntu and Mint and the interface differences between them. Most such articles take a very partisan position for...

6 hours ago by whs001 on A tale of two distros: Ubuntu and Linux Mint
Moley

@ewallace. Not so clear. Anyone can obtain the text, for example from here http://www.ustr.gov/webfm_send/2379. I support ACTA so long as it and...

6 hours ago by Moley on ACTA: Facts, misconceptions and questions
45283

I think WinRT is fantastic. I just wish it was an option for people that didn't want to go through Microsoft's App Store with its attendant...

9 hours ago by 45283 on Why Windows 8 needs architectural hygiene for WOA
Burn-IT

Nine people? £30m? Who's back pocket is that lot going in? And IF they say it is for new buildings, what about all the ones the government has...

10 hours ago by Burn-IT on Police set to launch three £30m e-crime hubs
ewallace

Just to be clear, nobody knows what is in the text of ACTA, here is a photograph of the text of ACTA http://twitpic.com/8h9iju as submitted to the...

10 hours ago by ewallace on ACTA: Facts, misconceptions and questions
fgvrg56

Unfortunately main issue is that ASUS is refusing to accept that they make some mistake on this version of asus Transformer prime. 1 - GPS sensor...

12 hours ago by fgvrg56 on Asus Eee Pad Transformer Prime Wi-Fi & GPS problems?
Ben Woods

@Marcus A fair question. Just talked with Archos which said it was working on an announcement for next week....

13 hours ago by Ben Woods on Archos confirms G9 Ice Cream Sandwich update schedule
Marcus Karlsson

Any update on this, considering the claimed "first week of February"?

14 hours ago by Marcus Karlsson via Facebook on Archos confirms G9 Ice Cream Sandwich update schedule
apexwm

Bill Goodrich : Just as al_langevin pointed out, with Windows Server 2008 there is no Services for Macintosh anymore. It's gone, not available....

22 hours ago by apexwm on Windows Server 2008 drops the ball for Mac compatibility
txtrainguy

Replying to an old topic that I'm currently facing with my CEO (who is on a Mac). Our servers are primarily Windows Servers, office is about...

1 day ago by txtrainguy on Windows Server 2008 drops the ball for Mac compatibility