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Juno Aggressively Grows Billable Subscriber Base

Juno Online Services Inc.'s strategy of luring users with a free product and then up-selling them to its premium service appears to be bearing fruit, as the company Monday reported strong growth in billable subscribers during its fourth quarter.

Juno said its active subscriber base -- users who log onto the service at least once per month -- rose to 4 million in December 2000, up 8.1 percent from its September total of 3.7 million. The company's total registered subscriber base topped out at 14.2 million as of Dec. 31, up from 12.8 million on Sept. 30. And that growth came in the same quarter that the company slashed its marketing budget to the bone.

The company also showed aggressive growth in its number of billable subscribers, a number to which industry watchers pay close attention. Juno offers both free and premium services. The free service does generate revenues in the form of ads, but its premium service generates monthly -- and forecast-able -- subscription revenue in addition to ad revenue. Juno said its billable subscriber base grew to 842,000 in the fourth quarter, an increase of 92,000, or about 12.2 percent, from the 750,000 it recorded in its third quarter. That means Juno's billable subscribers now account for about 21.05 percent of its 4 million active subscribers.

Gary Baker, spokesman for Juno, said the majority of subscribers choosing to go with the premium option -- which removes the floating ad banner that comes with the free version and also gives subscribers priority access to the Juno network and access to live tech support -- came from Juno's free user base.

"That's very much the goal of the free service," he said. "It brings people in the door and allows us to market the billable service to them."

Up-selling that customer base is important to Juno as it brings in regular, dependable revenue and the balanced revenue model makes it easier for the company to weather advertising slowdowns.

"We currently generate two-thirds of our revenue from the subscriptions paid by our billable customers," Baker said. "We want a more balanced revenue model and that's exactly what we've accomplished."

Part of the migration to premium billable services can also be attributed to measures the company adopted in December to encourage extremely heavy users of the free service to modify their usage patterns or upgrade to the billable service. Like free ISP competitors NetZero and BlueLight, an audit of Juno's books revealed to the company that a small percentage of its users were using up an inordinately high percentage of its telecom resources.

"We saw that there were a very small number of our subscribers who were literally eating us out of house and home," Baker said. "Five percent of the free users were using more than half of the telecom resources set up for the free service."

"We are very pleased with our fourth quarter subscriber growth, particularly in light of our significantly reduced subscriber acquisition expenditures during the quarter," said Charles Ardai, president and chief executive officer of Juno. "We're especially pleased that most of our billable subscriber growth came from users of our free basic service choosing to upgrade to our billable premium services. We believe the multi-tiered service model and free-to-billable conversion strategy which has long been central to our business plan represents a model for many Internet companies now seeking to diversify their revenue streams and reduce their reliance on advertising revenues."