Juno Files IPO
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E-mail, it has been said, is the killer app of the Internet. And truly, it's hard to argue against that, since more Americans report using e-mail daily than report using the Internet. You can't get much more killer.
One reason for this usage disparity is that companies offering "free e-mail" allow users with just a PC, modem and the right software to set up e-mail accounts without needing Internet access. The catch is that advertisements are included with the e-mail.
While the "free e-mail" concept began only three years ago, today there are few survivors among the original vendors.
One freemail survivor and pioneer is Juno Online Services, which snuck its IPO filing under the wire Friday afternoon. The company hopes to raise $86.25 million with a public stock offering under the Nasdaq symbol "JWEB".
This evolution was part of Juno's business plan as outlined in its S-1 filing. The company decided to first build a large subscriber base of users taking advantage of Juno's free e-mail service, which debuted in April 1996.
This target market included people who were less tech-savvy than the average Web surfer, potential subscribers who either didn't want Internet access, couldn't afford it, or lacked decent modems. Back in 1996, that was most Americans. (Indeed, it is today, but to a much lesser degree.)
Juno recognized that many of their free e-mail customers would soon "graduate" to full Internet usage as access and computer equipment became cheaper. Starting last July, Juno began offering "enhanced" e-mail services (the ability to send and receive file attachments) for $2.95 a month and full Internet access for $19.95 per month.
Today Juno has more than 6.6 million free e-mail customers, along with 191,000 billable service subscribers.
It's a seemingly decent strategy: Cultivate a base of loyal subscribers who will choose your services, through either loyalty or fear of the unknown, as their Internet needs grow.
Unfortunately, there are flaws in the strategy. Juno, like push pariah PointCast, has experienced tremendous "churn" among its subscribers. There are two reasons for this: 1) Customers today have about as much loyalty to their Internet service provider as they do to their long-distance phone carrier, and 2) Switching access providers isn't all that painful anymore. The psychological barrier is low, as is the cost to switch.
Juno also faces financial hurdles. While revenue growth has been positive -- from $136,000 in 1996 to $9.1 million in '97 and $21.7 million last year -- the company has an accumulated net loss through 1998 of $92.2 million.
The company says it plans to use proceeds from the IPO to market itself to potential customers beyond its existing suscriber base. It's going to have to: Juno is known to most of the world as "that free e-mail company," not a full-fledged Internet access provider.
That, however, is the game Juno is in. And it's listed as a latecomer and an underdog.