Familiar Names Jump on Free Access Bandwagon
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Forget $20 a month to surf the Internet. Now, in a battle for eyeballs, an increasing number of players are offering free Internet access.
NetZero (NZRO), a free access provider, signed up more than 1 million "subscribers" (users might be the word here) in only about eight months. A leading Web portal, AltaVista, recently began offering free access to registered users. On the first day, 50,000 users signed up. In less than two weeks; AltaVista had registered over 225,000 subscribers. By Dec. 13, the company had hit the 1 million user mark.
The companies are hoping that the personal information and online behavior collected will help them better target their advertising and e-commerce offerings. The end result should be higher click-through rates and higher price and volume purchases by customersadditional and improved sources of revenue by exploiting the dying model of traditional access.
The overwhelming leader in the consumer access space, America Online Inc. (AOL), currently generates 75 percent of its total revenue from subscriber fees. Richard Branson, the chairman of U.K. entertainment conglomerate Virgin, recently talked about his plans for a radical online initiative.
Virgin could very well be the next large-scale player to begin offering free Internet access services in the U.S.
Key trends to follow now will be:
- Free access users cannibalization of subscriber users and fees from existing, traditional access providers.
- The separation of brand buyers and price buyers.
- Community (sticky) features/services that lock customers into an access service.
- An access providers potential scalability into other businesses and markets. This is especially important for AOL which generates 75 percent of its current revenue from subscriber fees.
Excite@Home (ATHM) was the latest access/portal company to dive into the world of free dial-up access. On Thursday, the high-speed access provider launched FreeWorld in an effort to attract new users who will hopefully, at some point, convert to the company's paid, high speed access service.
As Internet access becomes more of a commodity, investors need to find businesses that are able to scale their model away from subscriber fees.
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