RealTime IT News

NetZero Banking On The Intangibles

What's in a domain name?

A lot, if you're a free Internet service provider that doesn't have ownership of the freeinternet.com name.

Details are sketchy and even a hint at a price tag produces a figurative zipping of the lips when it comes to NetZero Inc.'s non-binding letter of intent with FreeI Networks Inc., Friday. FreeINet announced it had filed for Chapter 11 bankruptcy protection earlier that day.

But the domain name and subscriber base are certain targets for the acquisition, NetZero officials said Monday. According to a spokesperson, more details would be released later this week.

Steven Harris, IDC senior research analyst of ISP markets, said the acquisition was expected, even though the lack of details wasn't.

"Freeinternet.com's acquisition came as no surprise, since it was one of the most vulnerable free ISP services," Harris said. "Its subscriber base was not huge, and its method of generating revenues, through advertisements, required that they make it real inexpensive to offer the service. Once you start contracting with Shaq, you're spending a lot of money."

Harris went on to say NetZero's decision to acquire FreeINet's subscriber base is difficult to assess, as many people who use free Internet services usually have another free service to begin with. In effect, Harris said, they're likely getting subscribers that are already double-dipping with NetZero.

While mum's the word about future of NetZero Inc., the free Internet service provider is definitely looking to cash in on the free Internet name.

According to Brent Zimmerman, NetZero director of investor relations, the intangible benefits to the freeinternet.com domain name could be worth its weight in gold.

"The domain name is one of the intangible assets were looking at," said Zimmerman. "Getting their domain name would be very beneficial to use. (FreeINet) has spent a lot of money marketing that domain, in addition to the price they paid for the domain itself.

"We see that as a benefit for us down the road," Zimmerman continued. "People are going to remember those Shaq and Baby Bob commercials in the future, get on their computer and type 'freeinternet.com.' We see that as a good thing and are looking to make the letter (of intent) binding, probably with cash/stock for the subscribers."

In its press release Friday, NetZero said it had signed a "non-binding letter of intent to acquire certain assets of FreeI Networks Inc." What those certain assets were had analysts and the media alike guessing throughout the weekend.

Mark Goldston, NetZero chairman and chief executive officer, said in the Friday release "our intent is to provide maximum continuity for Freeinternet.com users. NetZero intends to help Freeinternet.com users transition as smoothly as possible so they can continue to enjoy the benefits of free Internet access and e-mail."

As NetZero waits for the court's ruling on FreeINet's future, or lack thereof, the free ISP will have to scramble to make sure it can indeed offer continuous Internet service to its potential customers. While NetZero has the most subscribers with 4.9 million, it only offers service in 4,000 cities nationwide, 2,500 less than FreeINet.

That NetZero was going after the subscriber base was self-evident. It has the potential to add more than 3.2 million users to its fold, assuming people want to make the transition.

It's a model Juno Online Inc., has used with great success, building its free-to-pay Internet model into the third largest ISP in the U.S.

That was enough for investment firms to issue initial approval of the deal. Goldman, Sachs & Co. gave its seal of approval Friday afternoon in its research report.

"While specifics are not known at this time, we initially view the deal favorably as it will allow NetZero to continue