Juno Predicts Profitable Future

With net revenues of $114 million and more than four million active users in 2000, Juno Online Services Inc., is looking forward to the New Year.

It’s looking like a good year for Juno, according to officials who predict that net losses will drop to between $10-$25 million at the end of 2001, bringing it closer to a cash flow positive future.

In its 2000 annual report and fourth quarter report Juno, the nation’s third-largest Internet service provider, posted a 67 percent increase in revenues and a net loss reduction of more than $11 million over the third quarter.

According to Gary Baker, Juno spokesperson, the $56 million the free ISP has in its coffers, as of Dec. 31, 2000, is more than enough to see them cash flow positive.

“The $56 million is certainly a major step in the right direction for us,” Baker said. “It puts us in a good position for the things we want to do in the future.”

Its a cash situation the ISP is fortunate to find itself in, with lagging advertisement revenues industry-wide and its difficulty transitioning free members up to its premium services.

Billable services, the linchpin of any ISP and the source of 65 percent of Juno’s total revenues, totaled $73.9 million in 2000, a $39.4 million increase over 1999. But revenue gains have been sluggish, with $19.8 in the fourth quarter, a 4.3 percent increase over the billable revenues of $19 million in the third quarter and $18.4 million in the second.

To address that, officials plan on reducing the amount of discounts it gives out and increasing its efforts in getting heavy Internet users off its free program and into its paying model. Juno number-crunchers figure that five percent of its users, the heavy-use surfers, make up more than half of its telecommunications costs.

On top of that, officials expect advertising revenues to “decline substantially” in the first quarter of 2001, with no quarterly revenue increases for the rest of the year. The softness in the market for advertising will result in a 15 cent drop in the revenues Juno figures to get for every customer that uses its free service, down from $1.10 to 95 cents.

Offsetting that, officials note, is the drop in net losses the company has achieved in 2000. The reduction of those losses didn’t result in lowered subscriber numbers.

A large factor for the drop in net losses was the fact it cut the bottom out of its customer acquisition funding from the third quarter, from nearly $25 million to almost $9 million.

Despite the reduced marketing, Juno was still able to sign on 300,000 active users. Active users, as defined by Juno executives, are any registered Juno user who logs on more than once a month.

The free ISP currently has 14.2 million registered users.

Charles Ardai, Juno president and chief executive officer, said it was his company’s ability to reduce acquisition costs that really made an impact on savings and made for a successful year.

“We are very proud of our fourth-quarter results, which we believe provide evidence of certain economic advantages our business model offers within the current market environment,” Ardai said. “We believe it is particularly noteworthy that we were able to significantly expand both our active and billable subscriber bases while cutting our subscriber acquisition expenses by nearly a factor of three.”

“Our well-established, multi-tiered service offerings and our ability to cost-effectively upsell billable services to our free subscribers,” Ardai continued, “allowed us, among other things, to take advantage of the withdrawal of various competitors from the Internet access market in order to achieve low-cost growth in both our subscriber base and our billable-service revenues.”

He is, of course, talking about Juno’s purchase of defunct free ISP Feewwweb’s customer base in July, 2000. At the time of the purchase, Freewwweb had about 700,000 active users.

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