New ISP on the Block: iVillage

Look out America Online, MSN and United Online. Women-focused Web portal and media company iVillage is elbowing into the ISP game.

The new dial-up service is called iVillageAccess and is expected to be announced Thursday.

The launch represents a bold move by the New York-based company to leverage its loyal base of about 20 million monthly visitors to the Web site, as it diversifies revenue beyond advertising sales. For a company that made waves when it announced it would stop selling pop-up ads, the offering could help fill a gap where that revenue once stood.

At a monthly subscription fee of $17.95 ($15.95 monthly for subscribers who commit to a year of service), the iVillageAccess service is also a bold move to take subscribers away from other ISPs for a lower monthly price.

“I’d like to think we’re friendly competitors,” Douglas McCormick, iVillage chairman and chief executive, said of the new service. “We’ll be competing on price, quality and affinity. People know the iVillage brand stands for a lot, and for simplicity and affinity. Many members are proud of their iVillage association, and are likely to become affinity members. Why not buy (Internet service) from a trusted brand?”

And why not switch from other providers charging more, goes the logic. The pitch offers features such as five different e-mail accounts “at substantial savings over AOL and MSN,” or about $5 to $6 less than other ISPs.

“It’s cheaper and it’s simple,” McCormick said. “People have enough complications in their life without trying to figure out how to reconfigure their e-mail.”

The service is offering the TrueSwitch program, which helps users migrate e-mail contacts, addresses and Instant Message buddy lists, and even sends e-mails to contacts letting them know their new address. TrueSwitch is also being deployed by MSN in its quest to poach customers away from AOL; other ISPs are about to launch TrueSwitch as well.

The ISP offering is iVillage’s latest in a string of e-commerce and “premium” content offers the company began rolling out this year as it reaches for profitability by year end and weathers a brutal advertising recession.

iVillage recently announced a book publishing alliance with Rutledge Hill Press called the “iVillageSolutions Book Series.” It also began selling a line of iVillage-branded vitamins and nutritional supplements for women.

Although iVillage’s free e-mail and message boards will still be free, as well as the majority of the content in the site’s channels, the company has become emboldened by its members’ willingness to pay for extras. A sexual self-improvement course offered for $30.00 got 4,000 subscribers earlier this year. An online personality evaluation based on the Dewey Color System picked up 1,500 customers who paid anywhere from $9.95 for the introductory fee to $19.95 for the current price.

It also helps promote magazine subscriptions for Hearst Publishing, which owns 20 percent of the company, and takes a fee for each subscription it helps sell.

Already, e-commerce and fee offerings have boosted revenues by 20 percent and may help the company turn a profit. As of the second quarter ending June 30, the company’s net loss was $3.6 million, down from $18.5 million in second quarter 2001. Revenues increased to $16 million from $11.4 million over the same two periods.

After avoiding the Nasdaq delisting bullet earlier this year, the company’s stock price slid below the $1 level for a sustained period, prompting another delisting warning letter from Nasdaq. The company has until Dec. 16th to get its price back up to $1. It also may have the option of moving to a Nasdaq Small Cap market listing.

McCormick said he hopes to see e-commerce and premium services at iVillage represent about 50 percent of the company’s revenue base. “We’re looking to grow revenues. The ISP service is an extra thing that we offer, but it’s not our main business.”

The new service is a bit of a surprise, given that iVillage had said it was looking for a licensing deal with one of the major ISPs, notably AOL or MSN. Instead, it decided to contract with IP Applications, a Canadian provider of outsourced Internet services, including providing virtual ISPs (vISP).

By using an ISP outsourcer, iVillage is launching the service while limiting its financial risks by letting another company manage e-mail servers, points of presence, billing, customer service and IT support; it may be limiting its share of the revenues as well.

The virtual ISP route is gaining currency. ISP United Online recently bid $8.4 million in bankruptcy court for KMart’s e-commerce site as part of the retailer’s Chapter 11 reorganization. The plan, which awaits bankruptcy court approval, is to run the site for KMart while taking a cut of the revenues it generates.

iVillage officials say a broadband or high-speed Internet access service is also on the drawing table, depending on how the dial-up service is received. McCormick said a high-speed offering would be a great outlet for the programming assets the company owns, such as the Newborn Channel and the Women’s Business Network.

The former executive and founder of women’s cable channel Lifetime Network stressed that iVillage was not abandoning its membership base that helped build the site. “A rule in Business 101 is to move into these new businesses in prudent way.”

Updates number of monthly visitors

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