[email protected] Ushers in Free Access

[email protected] Corp. Thursday launched its free Internet access service.

Dubbed FreeWorld, the no-cost
Internet service is powered by technology from 1stUp.com, a CMGI, Inc. (CMGI)
company.

George Bell, [email protected] (ATHM)
president, said Excite aims to breakdown the cost-barriers associated
ith getting online, enabling consumers across US and Canada to enjoy free
Internet access.

“The narrowband market is clearly moving from a cost-based to a free access
model, putting pressure on pay for access ISPs,” Bell said. “Encouraging
mass adoption of the Internet is fundamental to our business model, and we
expect to take full advantage of the projected growth in the free ISP arena.”

Bell added that [email protected] is leveraging their diverse content to increase
their market share by acquiring new customers in an increasingly
competitive industry.

“Once online with FreeWorld powered by Excite, we increase audience and reach
for Excite and Blue Mountain Arts
content, and gain the opportunity to market our leading, high-speed @Home
broadband service to new subscribers,” Bell continued.

“We have already shown tremendous synergy in using our MatchLogic ad targeting division to
upsell narrowband users to broadband, and this will increase our narrowband
target audience significantly,” Bell said.

Charles Katz, 1stUp.com president and chief executive officer, said why pay
for Internet access when free services are now a competitive prerequisite.

“FreeWorld powered by Excite proves that people no longer need to pay for
dial-up Internet access,” Katz said. “Like free Web-based e-mail, free
access is now a requisite offering for any competitive Web site.”

Ben Addoms, [email protected] president of media and marketing services, said
Excite’s network infrastructure and @Home backbone architecture provide the
company with a thorough understanding of how to manage costs related to
offering free services.

“FreeWorld gives [email protected] the opportunity to increase revenue and
customer loyalty by leveraging the company’s core competencies,” Addoms
said. “With the ability to offer advertisers targeted marketing through our
MatchLogic division coupled with content areas that have some of the
longest dwell times in the industry, we are in a strong position to
monetize the FreeWorld service.”

Like other free Internet access providers, [email protected]’s business model is
based on advertising revenues. Registrants for the free service must
provide demographic information in order for [email protected] to deliver
targeted advertising programs for its sponsors.

However Rick Miller, Cahners In-Stat Internet
analyst, said free Internet access is simply not a profitable venture.

“Advertising revenues will never off set the costs of providing access on
the Internet so you need to use a free service and a means to compliment
and upsell some form of revenue generating service,” Miller said.

“If they want to do that it’s at least it’s a half-baked idea not a
completely unbaked idea,” he added.

Miller said the move to provide free narrowband access does not make sense
for a broadband service provider.

“I don’t know if they had to go to this effort, traditional dial-up
services by their traditional slow nature should be driving customers to
[email protected] or some other form of high speed access anyway,” Miller said.

Bill Whyman, Legg Maso

n (LM)
Precursor Group analyst, said [email protected] is offering the free service to
attract new customers, not profit from advertising revenue.

[email protected] is offering free narrowband access because it’s a tool to
migrate new customers to their more profitable broadband services.” Whyman
said.

“I don’t think a free isp is going to be hugely profitable,” he added. “The
real value for [email protected] is in customer acquisition, which is getting
very, very expensive.”

Whyman added that this is a sincere attempt to unlatch American Online’s lock on the new user
marketplace.

“If [email protected] can acquire customers through this free isp service and
then upgrade them over time to cable services than the economics of it are
beautiful.” Whyman said. “The challenge will be actually doing it, because
it’s another attack on AOL (AOL)
and other Internet service providers.”

There is no doubt that free Internet access is growing in popularity. On Thursday, AltaVista announced that membership in its
free Internet access program has exceeded 1.5 million registered users. The company launched its service in August.

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