The founding members of NetZero, Inc. , have called it
quits, setting their sights on another entrepreneurial project after seeing
their first creation become one of the country’s largest Internet service
providers.
The free ISP model, in which customers “pay” for Internet access by opting
to receive banner advertising on a customized toolbar, took the nation by
storm, bringing millions online and sparking the Internet craze of the
mid-1990s.
The company spawned by Ronald Burr, Stacy Haitsuka, Harold McKenzie and
Marwan Zebian were just one free ISP entry out of many that popped up at
the time, promising free unlimited service. But they quickly proved to be
one of the most popular, outstripping competitors like Spinway and 1stUp.
While other free ISPs were going out of business or getting bought out by
competitors, NetZero was able to remain solvent, although its business
model was clearly in jeopardy. Looking to stem its losses, company
executives were forced to charge subscribers for access and look for other
ways to become profitable.
The recent acquisition of Juno Online Services, Inc. ,
was the culmination of those efforts, a marriage of two of the largest ISPs
in the nation. Juno, with its very successful free-to-pay model, provided
a platform NetZero could use to bring its own 3.7 million users online as
paying customers.
But the merger of the fourth and fifth
largest providers in the country was likely a sign to its creators that
NetZero couldn’t operate in the fashion they had envisioned. Suddenly the
largest free ISP in the world, the self-styled “Defenders of the Free
World,” was looking at the profit margins, not free service.
Now, instead of bringing the Internet to the masses, United Online (as the
NetZero/Juno hybrid will soon be called) will look for ways to compete
against its archrivals, AOL Time Warner , EarthLink, Inc.
, and the Microsoft Network.
The four founders brought Mark Goldston, NetZero chairman and chief
executive officer, onboard at a time when the free ISP model was
experiencing the first signs of financial troubles to come. Goldston, a
business strategist who specialized in consumer and technology branding,
was brought in to maximize profits at the free ISP.
He had nothing but praise for the four founding members of the company he
now controls.
“Before launching the service in 1998, they built a foundation of
cutting-edge technologies that have enabled us to offer the quality
Internet access that our millions of users have come to expect,” Goldston
said. “I have a lot of respect for their talents and innovative thinking,
and I know I speak for everyone at NetZero when I wish them the best of
luck in their exciting new venture.”
The departure has been brewing for months and didn’t come as a surprise to
upper management at NetZero. In the past six months, Burr, Haitsuka,
McKenzie and Zebian have been focusing less and less on day-to-day
operations and more on creative projects, like high-speed Internet access
and wireless projects, that gave them more time to develop their own
fledgling company.
Stepping up to fill the void in those last months were Dr. Gerald Popek,
who was hired as chief technology officer late last year, Goldston and
Randy Tamura, who took McKenzie’s position as vice president of software.
There’s not a lot of information available about the new company the four
ex-Defenders have created, only that it is called Layer2
Networks. Officials at NetZero would not say anything about the venture,
saying only that it was not an ISP.
The domain, www.layer2networks.net, was
registered April 4 under one Marvin Z of Westlake Village, CA, likely an
alias of Marwan Zebian to avoid tipping media off to the imminent departure
from NetZero. Currently, the Web site only features a logo with the words,
“Bridging the Broadband Network.”
Given the name of the company and its slogan, Marwan and company have
likely decided to focus on some of the more dynamic aspects of Internet
access, handled at the Layer 2 tunnel protocol. Also called a virtual
line, layer 2 networking allows users to manage their dial up service away
from the network, whether at home or through the company network.
Burr wished his former peers luck in the ISP business he leaves behind,
knowing its in capable hands.
“I wish NetZero and United Online much future success,” Burr said. “I have
a great deal of respect for Mark Goldston and the rest of NetZero’s current
management team, and I know that the company is in very capable hands.”
