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Paying Customers Help Juno Narrow Q2 Loss

Internet service provider Juno Online Services, Inc. got paying customers to pony up more and slashed costs during the second quarter, which helped narrow its net losses by over 90 percent within a year.

The New York-based Juno, which is merging with former all-free ISP rival NetZero to become United Online, said its net loss for the quarter was $2.6 million (6 cents per share) on revenues that dipped to $29.4 million from the $29.5 million it took in during last year's second quarter.

The narrowed losses, however, were a 94 percent improvement over the net loss of $42.9 million ($1.11 per share) during the second quarter of last year.

Juno's CEO, Charles Ardai, said cost-cutting across the board and an improvement in the margins from billable subscribers made the difference, even though the number of paying customers actually slipped during the quarter.

As of the end of June, Juno had 3.3 million active subscribers (down about 20 percent), and 884,000 were paying customers, down from 910,000 it had during the first quarter.

During the quarter, Juno took steps to boost revenues from paid users while discouraging bandwidth hogs on the free service to "modify their usage patterns or upgrade to a billable service."

The billable subscribers brought in $24.8 million during the quarter, or 84.4 percent of the total sales, an improvement of 25 percent from what paying customers brought in during last year's second quarter.

Revenue from advertising and transaction fees dropping dramatically to $4.6 million from $10.7 million in the year-ago quarter, and free users continued outstripping the ad dollars that support them.

While it continues pushing its free users to switch, Juno said its active and billable subscriber count is expected to decline over the coming quarters; free users may decide not to bother.

But even as its paid subscriber base declined, the margins on those paying customers improved. Earlier this year, for example, Juno upped its unlimited subscription charges for new users to $14.95 per month, from $9.95. But with Earthlink and AOL moving to up their monthly ISP charges, observers expect Juno to do the same soon.

As of the end of June, Juno had about $42 million in cash and cash equivalents in the bank. That should help ease the impact of the soft outlook for advertising revenues. It expects its net loss for the rest of the year to be less than $2 million.