Another casualty of today’s harsh advertising climate takes effect today, when intranet service provider Intranets.com abandons its free, ad-revenue based service and standardizes on an enhanced, subscription-based service based on its current Professional Edition.
“The new economic realities of Internet advertising have made the distribution of free services on the Web an impossible financial model to sustain,” said Steve Crummey, Intranets.com’s CEO and president. “Intranets.com wants make sure that we’re a strong and viable company for our corporate and small business customers, and the way to ensure that goal is to begin charging a fee for services.”
In addition to the weak ad market, Crummey told InternetNews the decision to move to a paid model stemmed from a backlash against banner ads and free services. “No businesses take free stuff seriously. Between the ‘free equals no good’ mentality, hatred of banners, and evaporating advertising, we decided to move to a subscription-only service,” he said.
Another driving force was that the ad-based model was simply not profitable. If Intranets.com gets the expected number of subscribers, the company can reach profitability within a year, Crummey said. “A subscription-based revenue stream is a much stronger revenue stream, especially in the eyes of Wall Street.”
In April 2001, Intranets.com launched its Professional Edition – an advertising-free, enterprise-quality hosted intranet service for corporate and small business subscribers. The Professional Edition will form the basis of the company’s unified offering.
Customers current using the free service will automatically be switched to the subscription intranet for a free 30-day trial period beginning today. Subscribers receive enhanced functionality with the paid service, including four times more storage space, a task manager, expense reports, wireless access and synchronization with Palm devices and Microsoft Outlook. These new features complement the core communication and collaboration applications such as hosted e-mail, document sharing, announcement posting and group calendar.
There are currently 1.5 million registered users of the free service, with 65 percent of those considered active, Crummey said.
Intranets.com develops most of the applications it offers in-house. Of the 10 applications currently available, only two are licensed from other developers – hosted email and instant messaging. “Our strength lies in the application side. We’re application developers – that’s what we do,” Crummey said.
Pricing starts at $19.95 per month for up to four members, plus $5.00 per month for each additional member. Intranets.com also offers discounts for non-profit and educational organizations. The cost for a 100-person organization would be about $6,000 a year, while the cost to develop a similar intranet in-house could easily reach $50,000 to $75,000, plus the cost of upkeep, Crummey said.
“Our core customer base of corporations and small businesses has long requested an advertisement-free intranet solution with enterprise-quality applications and functionality,” Crummey said. “The response from our core customers to the subscription service has been overwhelmingly positive.”
Intranets.com also has key relationships with several partners, many of whom are web hosting or communication providers who integrate the service into their own bundled small-business offering. The partner can choose to offer the service as a co-branded or private-label solution, with Intranets.com hosting it in either case.
Crummey expects the shift from an ad-based model to subscriber model to help this aspect of the business as well, since partners can count on the steady paid model more than the spotty ad-based approach. “Signing up for a rev-share with advertising is like volunteering to be ugly,” Crummey said. “It’s not something people want to do.”
Privately held Intranets.com is based in Woburn, Mass., with worldwide offices in Tokyo and in the Netherlands. Startup incubator idealab! provided Intranets.com with initial consultative and financial support, and continues to be a strong ally in the company’s development.