E-mail, it has been said, is the killer app of the Internet. And truly,
it’s hard to argue against that, since more Americans report using
e-mail daily than report using
the Internet. You can’t get much more killer.
One reason for this usage disparity is that companies offering “free
e-mail” allow users with just a PC, modem and the right software to set
up e-mail accounts without needing Internet access. The catch is that
advertisements are included with the e-mail.
While the “free e-mail” concept began only three years ago, today there
are few survivors among the original vendors.
One freemail survivor and pioneer is Juno Online Services, which snuck
its IPO filing under the wire Friday afternoon. The company hopes to
raise $86.25 million with a public stock offering under the Nasdaq
Though known primarily for its free e-mail, Juno really is positioning
itself as an Internet service provider, its offerings having expanded to
include Web access.
This evolution was part of Juno’s business plan as outlined in its S-1
filing. The company decided to first build a large subscriber base of
users taking advantage of Juno’s free e-mail service, which debuted in
This target market included people who were less tech-savvy than the
average Web surfer, potential subscribers who either didn’t want
Internet access, couldn’t afford it, or lacked decent modems. Back in
1996, that was most Americans. (Indeed, it is today, but to a much
Juno recognized that many of their free e-mail customers would soon
“graduate” to full Internet usage as access and computer equipment
became cheaper. Starting last July, Juno began offering “enhanced”
e-mail services (the ability to send and receive file attachments) for
$2.95 a month and full Internet access for $19.95 per month.
Today Juno has more than 6.6 million free e-mail customers, along with
191,000 billable service subscribers.
It’s a seemingly decent strategy: Cultivate a base of loyal subscribers
who will choose your services, through either loyalty or fear of the
unknown, as their Internet needs grow.
Unfortunately, there are flaws in the strategy. Juno, like push pariah
PointCast, has experienced tremendous “churn” among its subscribers.
There are two reasons for this: 1) Customers today have about as much
loyalty to their Internet service provider as they do to their
long-distance phone carrier, and 2) Switching access providers isn’t all
that painful anymore. The psychological barrier is low, as is the cost
Juno also faces financial hurdles. While revenue growth has been
positive — from $136,000 in 1996 to $9.1 million in ’97 and $21.7
million last year — the company has an accumulated net loss through
1998 of $92.2 million.
The company says it plans to use proceeds from the IPO to market itself
to potential customers beyond its existing suscriber base. It’s going to
have to: Juno is known to most of the world as “that free e-mail
company,” not a full-fledged Internet access provider.
That, however, is the game Juno is in. And it’s listed as a latecomer
and an underdog.