Though still losing money,
a number of free
ISPs are reporting higher
earnings compared with previous quarters, pointing to
strong growth in the market.
Germany's FreeServe, for example, reported sales of
around $8.1 million for the first half of 2000, up
from nearly $370,000 in sales in the year-earlier
period, with a net loss of $2.67 million for the
latest period.
Now the third largest ISP in Germany, after
Deutsche Telekom and America Online's T-Online, the
company said it generated around $2.16 million in
advertising sales and $1 million in e-commerce sales.
Two prominent U.S. free ISPs, Juno Online Services
and NetZero, both recently announced higher quarterly
revenues as well. Juno said revenues for the quarter
ended June 30 totaled $29.6 million, up 166 percent
compared with the year-earlier period, with net losses
totaling close to $43 million compared with $17
million last year.
Juno, which says it has 3.38 million active
subscribers, recently made news when Time Warner
agreed to allow it to offer Internet service over its
network.
NetZero, meanwhile, said revenues for the quarter
ended March 31 totaled $16.8 million, up from $12.2
the previous quarter. The company's net loss rose
slightly, from $24.6 million to $24.8 million.
Analysts caution, however, that free ISPs operate
in a very competitive market and must contend with
high overhead costs and narrow profit margins.
"The market appears receptive to free access
offering, and the potential for expansion is great,
but free ISPs must overcome many operational and
financial obstacles to achieve longevity," said
Strategis Group analyst Ty Cottrill.
Some companies in the market have not survived.
When WorldSpy and Freewwweb went out of business
recently, Juno took over their roster of customers.
But while other free ISPs may fall victim to a
similar fate, the demand for free ISP service bodes
well for the industry in general, according to
Washington, D.C.-based Strategis, which predicts the
12 million current free ISP customers will rise to 37
million by 2005, accounting for about 23 percent of
residential Internet users.
Internet advertising, a key source of revenue for
free ISPs, is growing, with revenues for the first
quarter of 2000 nearly hitting $2 billion, according
to a new PricewaterhouseCoopers survey sponsored by
the Internet Advertising Bureau, a not-for-profit
trade group.
"While the market correction and subsequent
dot.com closures likely had some impact in slowing
growth in the second quarter, the continued and
growing numbers of large traditional advertisers
expanding their budgets for Internet campaigns are
really the news here," said Internet Advertising
Bureau Chairman Rich LeFurgy.
Other U.S. providers of free Internet access
include Spinway, which recently announced it received
$32 million in funding; 1stUp, whose customers include
the Address.com and Ameritrade Web sites, among
others; and FreeInternet.com.
Counting dialup, cable, free and DSL subscribers,
America Online leaves all others in the dust, with an
estimated 23 million customers. EarthLink, NetZero,
1stUp.com and Juno follow, with 3 million to 4 million
customers each.
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