December 10th, 2000
It is the evening of
December 10,
2000. Mark Goldston, the new CEO of NetZero
Inc., is still preparing his presentation for tomorrow's meeting. He is really worried about this meeting
which will include all of the directors and executive officers. He does not know if
they will reach an agreement, but he does know that his proposal of offering paid Internet
service will be a surprise in that conference room.
He is afraid that reaching a decision on one of the two alternatives will be
difficult. He is also afraid that some directors will disagree with the
idea of paid service all together. But, something must be done soon to
improve the company's financial performance.
2000 has been a difficult year for free Internet service providers. Competition
between free and paid providers has become very intensive. Meanwhile, more and more users
have signed up for free accounts,
which dramatically raises these companies' technical support costs. It
seems that the revenues from advertisers and marketers can no longer cover the huge
costs. Many free Internet service providers went bankrupt this year1. NetZero Inc., one of the pioneers in
the
industry, is also confronting its most difficult situation since it started.
The net loss of $91,286,000 in fiscal year 2000, which ended on June 30th 2000, forces
management to think about giving up its reputation of totally free Internet service.
Because of this, Mr. Goldston has developed two proposals for tomorrow's
meeting: charge heavy use customers, or offer an advertising-free option for a
flat monthly fee.
History
With approximately $5 million in venture capital, NetZero launched its free Internet access service on October 19, 1998. NetZero was the first company to offer completely free Internet access to consumers. The company based its strategy on the widely accepted model of commercially-supported television and radio. All of its revenue was generated through advertising. After installing the NetZero software, users answered about 30 questions about their age, occupation, interests and other demographic information.
NetZero partnered with NetGravity to dynamically target and deliver online messages to users' computers. NetZero's zCast software and NetGravity's AdServer allowed NetZero to be the first company to take a critical step towards true one-to-one advertising. Using the information generated from the questions as well as information tracked through the software, NetZero's advertisers targeted ads to certain demographic groups with specific interests. Advertisers could also target consumers geographically, based on the area code information they use to connect to NetZero. Advertisements are displayed to consumers in a movable, 1-inch-by 3-inch window on the computer screen. The subscriber can click on ads displayed in the window, and move the window, but the window cannot be closed.
When NetZero launched in October, it expected to sign up 500,000 subscribers in six months and 1 million in a year. It signed two advertisers initially, Etoys, Inc. and GoTo.com Inc. a web search engine. To keep its costs low, NetZero leased its network from GTE and AGIS. NetZero also offered minimal support to subscribers. There was no toll-free number; consumers would have to get help via fax or on the firm's Web site.
By mid-November, NetZero had enrolled 50,000 subscribers and several new advertisers. The service looked to be a hit. And the numbers continued to grow. By early January, there were over 200,000 subscribers and a new one signing on about every 45 seconds. In February 1999, NetZero received multimillion-dollar second-round financing from venture capitalist firms. By this time NetZero was delivering more that 300 million page views per month.
NetZero reached its goal of 500,000 subscribers a month early, March 17, 1999, making it the fastest growing Internet access provider ever and the 10th largest ISP by volume. And the company was receiving sustained advertising support. Advertisers now included Disney, Amazon.com, and Macy's. The company's revenue projections were consistently exceeded and they were 100 percent sold out at this point.
NetZero announced it had reached the 1.5 million-subscriber milestone on August 15, 1999. In late August the company launched its first national advertising campaign to attract subscribers. Until this point all traffic had been generated by word of mouth. And on September 24, 1999, NetZero's Initial Public Offering generated an additional $160 million for the company by selling 10 million shares at $16 per share.
Throughout 1999 NetZero continued to grow its subscriber base and develop alliances. Competition intensified as companies including Excite@home and Juno attempted to enter the free Internet service provider arena. NetZero battled competition by continuing to develop its brand image, refine its advertising services, and acquire or partner with strategically important companies.
By early 2000, NetZero announced it had 3 million registered users, second only to AOL with its 20 million subscribers. NetZero released an updated, user-friendlier version of its software in January, proving its ongoing commitment to free and quality Internet access. In March of 2000, NetZero formed the CyberTarget division designed to conduct mass-scale online market research. Two months later, Qualcomm invested $144 million in the company, giving them a 10 percent ownership in NetZero. By the end or April, registered users grew to 4 million, with approximately half of these users accessing the service regularly.
NetZero unveiled NZTV in May of 2000, utilizing technology from its purchase of AIMTV late in 1999. NZTV allowed NetZero to show television-like commercials during the modem connection phase of signing on to the Internet. In another important technological innovation, NetZero announced that it would offer a Linux version of its software, making wider distribution possible.
Throughout 2000 NetZero had continued to grow, develop, and innovate.
The company experienced rapid subscriber growth in November when several of its competitors including AltaVista and Spinway ceased operations.
By mid-December, NetZero had 7 million subscribers2.
Founder Profile
NetZero was founded in 1997 by a four member team consisting of Ronald T. Burr, Stacy
Hiatsuka, Harold MacKenzie, and Marwan Zebian. This core of IT professionals worked with each other while employed at Impact Software.
In fact, Impact was co-founded by Ronald T. Burr and Stacy Hiatsuka. The team saw the opportunity for a revenue model based on advertising sales where internet users could gain free access to the net.
Since they had already worked together at Impact, the team knew each others' strengths and weaknesses and realized that this core could be augmented with financial and sales specialists to create a solid foundation of technological know-how and business savvy.
Ronald T. Burr got his start in the software field, working his way into a position as vice- president of software development with Vault Corporation, a software startup founded in the mid-eighties.
He then held a senior consulting technical team leader of a jointly developed project produced by IBM and Security Pacific Automation Company.
After leading the techinical aspects of the successful project, Mr. Burr left to start his own company with the help of Stacy
Hiatsuka. In 1991, Impact Software was founded. Ronald served as president from 1991 to 1998.
Stacy Hiatsuka obtained a B.S. degree in Computer Science from California State University at Dominguez Hills in 1987.
Armed with his degree, Mr. Hiatsuka found a position with Security Pacific Automation Company, where he would eventually meet and befriend Ronald Burr.
They worked together on the joint project, and at the projects end, left together to start Impact.
Mr. Hiatsuka served as the vice-president of Impact Software from 1991 to 1997.
Marwan Zebian also came from Security Pacific Automation Company, where he held various technical
postions. He did not, however, make the move to Impact like Burr and
Hiatsuka. Instead, he left to found his own company Megasoftware Engineering which he ran from 1990 to 1994.
Mr. Zebian then rejoined his former collegues at Impact in 1994 where he held a position as a technical expert.
Harold MacKenzie also recieved a B.S. degree in Computer Science from California State University; however, he attended the campus at Northridge.
After school, MacKenzie got a job with the Robotics Division of Seiko Instruments Incorporated, where he worked from 1989 to 1992.
From February 1992 to December 1995, Harold was a senior consultant for Andersen Consulting.
He left Andersen to join Impact in 1995, where he was an independent consultant focusing on custom computer applications.
He then obtained a management postion which he held until 1998, when he left to help found
NetZero3.
Critical Success Factors
It is not difficult to become an Internet service provider. Networks can be leased, connectivity is easily provided by third party services and simple software is not difficult to develop.
Because of this relatively low barrier to entry, many Internet service providers have come and gone.
The real challenge is in discovering a way to remain a viable, long term company.
Four critical success factors will determine a company's staying power as an ISP: a viable revenue model, the ability to attract and retain critical mass, access to and development of technology, and meaningful partnerships.
Revenue Model
All companies who expect to succeed need a plan on how they will generate revenue, control costs, create value, and ultimately make a profit.
Internet service providers have a variety of options in selecting a revenue model.
Many companies including Prodigy and AOL choose subscriber-fees as well as advertising to generate revenues.
NetZero based their advertising only revenue model on television and radio.
In order to make this revenue model work, a company has to offer a viable plan to attract advertisers.
NetZero offers advertisers unique advertising capabilities, including URL targeting and profile-specific ad targeting.
NetZero also charged a premium for these capabilities and used technology to enhance its advertising abilities.
But even with a well-planned revenue model, NetZero still must meet the challenge of convincing companies that online advertising is valuable.
It is still a new medium and companies are undecided as to how to rate and measure its effectiveness.
Critical Mass
Without consumers, no advertisers will be interested in offering an ISP advertising dollars.
This meant that NetZero would have to attract customers quickly in order to entice advertisers.
A start-up company rarely has sufficient funds to embark on a large advertising campaign and NetZero was no different.
However, the company introduced a unique value proposition to its customers: free Internet access.
Not just free Internet access, but also quality Internet access, easy connections, and nationwide service.
And then NetZero worked to build a brand, establish a community and attract more users and advertisers.
The company established partnerships to access distribution channels and worked to make its software easy to download and easy to use.
People enrolled quickly, and sign-ups gained momentum for several months. But having critical mass is more than just a large number of subscribers.
Advertisers want users, people actually signing on and using the system, there has to be stickiness.
NetZero has upgraded its ad window to include speed dial buttons for popular Internet services and the company has improved its start page;
but, NetZero has struggled to create a community similar to AOL or
Yahoo!.
This is an ongoing challenge for NetZero and other Internet service providers.
Technology
Technology permeates an Internet Service Provider's business in many ways.
First, the company must offer user-friendly software. Next, connectivity must be consistent and hassle free.
Both of these tasks are relatively easy to accomplish since software is readily available and networks and service backbones can be rented.
But an Internet service provider still needs to differentiate itself through technology.
NetZero for example uses technology to offer value to its advertisers. Through partnerships, acquisitions and development, NetZero works to improve its advertising targeting and methods.
NZTV4 and web monitoring technology acquired by purchasing Simpli.com are two examples.
Through bundling its product with the NIC Internet appliance, NetZero reached new users and improved its critical mass.
NetZero is able to broaden its revenue source through services from its CyberTarget division, which uses advanced data warehousing and marketing technologies.
For
NetZero, a reliable technological interface meets the consumers' needs while advanced marketing technologies puts them above the competition in the eyes of advertisers.
To be successful, an Internet service provider will need partners. These partnerships will come in many forms, including technology, content,
advertising, and distribution alliances.
"Future success of our business depends not only on enhancing our own feature set, but on the continuous expansion of our services through new strategic partnerships with highly respected online and offline
brands," said NetZero's Chairman and CEO Mark Goldston recognizing the necessity of forming alliances in order to continue moving forward in the evolving Internet world.
Technology Alliances
Among NetZero's technology alliances, the partnership with InsightExpress, the Web's first fully automated online research company, is one of the most significant.
By the power of this alliance, InsightExpress became the research application service provider (ASP) that enabled
CyberTarget, NetZero's market research division, to create surveys in minutes by gaining immediate access to NetZero's unique, click stream-based respondent samples. By combining the technologies of CyberTarget and
InsightExpress, NetZero was able to offer an arsenal of research data to marketers about the online surfing and shopping habits of consumers and, more importantly, give them the ability to communicate directly with those consumers on a highly targeted basis.
Content Alliances
A multi-million dollar strategic partnership with LookSmart, the largest directory of quality Web sites, represents one of NetZero's central content alliances.
Under this partnership, the two companies created a new co-branded, content-rich start page for NetZero subscribers.
This allowed NetZero subscribers to gain access to LookSmart's quality content of more than 750,000 unique site listings in over 30,000 categories, all selected, described and organized by the Internet's largest team of professional Web editors.
This alliance combined NetZero's growing portfolio of services with LookSmart's high quality directory and search engine.
The strategic alliance with eTour.com, the personal tour guide of the Web is another important content partnership of
NetZero. The agreement brought eTour's exclusive Web site delivery service directly to NetZero subscribers, further personalizing their online experience and easing their navigation of the Web.
ETour was now predominately featured on the start page for NetZero Canada subscribers, delivering great Web sites that match their specific interests
every time they log on.
Based on each NetZero member's personal interest and hobby preferences, eTour will deliver relevant Web sites directly to the individual's start page each day.
With each click of eTour's "Next Site" button, members could now be transported to a new site that matched their interests, like using a personal remote control for the Web.
These selections changed daily and were handpicked as "Best of the Net" by eTour's editors.
NetZero continues to add partners to enhance its stickiness and offer
subscribers easy access to desired content.
Advertising Alliances
One of NetZero's key advertising partnerships involves a four-year strategic alliance with
General Motors, one of America's most established consumer goods manufacturers and largest advertisers.
The agreement includes virtually every advertising and targeting product offered by
NetZero. Thus, as part of this agreement, GM became the premier automotive partner on NetZero's unique navigational tool, The ZeroPort™, as well as the exclusive auto content provider for NetZero's personalized Web page,
ClubZero™.
An interesting example of NetZero's advertising alliances is its partnership with
KIIS-FM, the Los Angeles area's No.1 hit music station with more than 2.5 million weekly listeners.
This partnership brought together leaders in net access and radio by offering an array of custom branding and co-marketing opportunities for the two companies.
It included promotions through KIIS-FM's morning show, the creation of custom-branded free Internet access,
a home page for
KIIS-FM listeners, and a variety of event sponsorships and promotional opportunities.
Internet access powered by NetZero could now be downloaded from sites showcasing the station and its personalities.
KIIS-FM started distributing co-branded CDs at concerts, promotions and events throughout the
year.
Distribution Alliances
The distribution alliance with Key Tronic Corporation, a world class contract manufacturer and leading independent keyboard manufacturer bundled NetZero's free dial-up Internet access with a select number of Key Tronic's high-quality keyboards.
By partnering with Key Tronic, NetZero was able to increase its presence in the computer peripheral market where Key Tronic was an industry leader.
Other Alliances
Other important alliances that allowed NetZero to provide an enhanced internet services to its customers include partnerships with such companies as Nortel Networks, which led to the launch of NetZero Internet Call Waiting, and Rainbow Rentals, Inc., a leading U.S. operator of rental-purchase stores, which allowed NetZero's free service be loaded into computers available for rent or purchase at Rainbow's 112 stores and its online store at www.rainbowrentals.com. Further, NetZero partnered with e-centives, a leading online direct marketing infrastructure company. This agreement enabled NetZero to provide its users with individualized e-centives offers, such as online promotions and digital coupons, from more than 150 leading brand-name marketers. The strategic alliance with New Internet Computer (NIC), a Larry Ellison-owned Oracle spin off, bundled NetZero with the producer of affordable internet appliances that give the users quick and easy e-mail and Web access. NetZero's partnerships with Cisco, Compaq and many others help to enhance NetZero's service offerings to its entire subscriber base.
Strategic alliances serve as a critical success factor for the company, allowing it to achieve a competitive advantage by staying on the cutting edge of technology, consistently improve the service and provide an even greater value to the subscribers.
Competitors5
In the Free Internet Service industry, NetZero is one of the biggest. Its major competitors are Juno and American Express Online. Some other competitors, such as AltaVista FreeAccess, iFreedom, and MyPoints Connect, ended their services recently because of bankruptcy.
Juno started as one of the first free e-mail services in April 1996. At that time, Juno was the only free e-mail service that offered dial-up access.
Recently, Juno began offering paid Internet access, followed by free service.
In terms of a business model, Juno is the most direct competitor to NetZero.
Most of Juno's revenues come from advertising. As of November 2000, more than 400 firms
had advertised on Juno.
More than 14.2 million Juno accounts have been created since the launch of their basic service.
There were approximately 4.0 million active subscribers during the month of November 2000.
Juno does well at helping advertisers reach the right audience, because Juno collects rich information about each user and about his/her household members when the user signs up.
Juno divides users into different segments based on the information the users provided.
For each segment, Juno displays particular ads that are related to the users' interests. Juno's setup is extremely easy, though time-consuming.
The step-by-step instructions make it easy for users to install, and get on the Internet.
Juno responds to incorrect or missing form entries by circling the errant field, and showing a colored help bubble with more complete instructions.
Technical support is available, though it costs $1.95 per minute. Juno attempts to make web content easy for new users by integrating content on the first screen users see.
For users who know their way around installing software, Juno is probably not a good choice.
The free version of Juno offers fewer access numbers than most other services, so users are less likely to find a local number.
In addition, the ad banner that is always on top of the screen is much larger than
that of any of the other free services. Juno also requires an extraordinary amount of personal information in order to
establish an account.
They require the user to disclose his birth date, the birth dates of each of any
children, income, occupation, education level, a detailed list of items the user
owns or plans to purchase, and more.
Juno's target user segment is that of users who are either existing Juno e-mail account subscribers or very new to the Internet or computers in general, and do not mind giving out the detail personal information.
American Express has put itself on top of the free ISP industry with American Express Online, its free ISP for cardholders.
While most free ISPs have been relying on advertisers to earn a profit, American Express has chosen to provide the service as a reward to its existing cardholders.
American Express Online provides some services normally reserved for monthly-fee ISPs, including 24-hour toll-free technical support,
an advertising-free web space, and access to Usenet newsgroups.
The service does still show ads at times, but they are normally shown only when the user is not actively clicking or typing.
Connections are generally speedy. For users, American Express Online seems to be the best choice.
The only disadvantage is that the user has to be an American Express cardholder. American Express Online adds value to American Express by attracting more customers.
Meanwhile, it adds value to American Express cardholders by providing free internet access services.
Other Competitors
Besides these free Internet access service providers, NetZero also competes with the companies in paid
the ISP industry. America Online, Inc. is the biggest competitor in this industry.
America Online, Inc. is the world's leader in interactive services, Web brands, Internet technologies, and e-commerce services.
Founded in 1985,it is a division of AOL Time Warner. AOL initially offered limited online services for
the then miniscule market of personal computer users.
Today, it serves more than 29 million members of its flagship AOL service.
AOL has always been known for providing the most convenient and easiest-to-use interactive service available.
The Company pioneered technologies like Keywords for simple navigation, and the Buddy List to enable instant messaging by showing which of
members' contacts are online.
The flagship service offers members a complete package of online features. The service can be accessed using any high-speed connection, or by dial-up connections from virtually anywhere in the world.
AOL has also led the way in protecting members' online privacy and security.
AOL offers a variety of pricing plans ranging from $4.95 for three hours of use
to $21.95 for unlimited access.
Marketing Practices3
To win more and more users, hence, to make NetZero more valuable for advertisers and marketers, NetZero implemented some important marketing practices.
In September 2000, NetZero and ThinkLink, the
premier communications application service provider of Internet integrated messaging and communications
services announced the launch of the "NetZero Message Center". NetZero Message
Center launched with a fully integrated,
web-based messaging and communications center including free voicemail, paging
and low-cost outbound calling anywhere in the continental United States,
anytime.6 To emphasize the effectiveness of Web advertising
while broadening the definition of success in the online medium, on October 4
2000, NetZero launched an innovative program guaranteeing a 33 percent increase
in Web site traffic for certain new advertisers who qualify for the
program. In early December, NetZero announced the launch of the new NetZero
Shopping Mall. The Mall is powered by RocketCash, a wholly owned subsidiary of
NetZero that offers a secure, flexible-currency shopping technology enabling
consumers to make purchases on the Internet with or without a credit card.
Financial Performance
With competitive pressures intensifying, many of the nation's estimated 7,900-plus Internet service
providers will not make it.
Many of these companies are losing money.
Hundreds are already for sale. Some will vaporize in a
wave of coming consolidation or die. In the past six months, hundreds of ISPs have put themselves on the auction block for pennies on the dollar, merged or shut
down. The four biggest ISPs with their net incomes (or rather net losses) are presented in
Exhibit 1.
The latest victim of the unfavorable "dot com syndrome" is Spinway, a struggling free ISP. Kmart's
e-commerce company, BlueLight.com, agreed to buy some of its assets. Other free ISPs, including Freewwweb and WorldSpy, shut down last summer.
Internet holding company CMGI has been trying to sell free ISP 1stUp.com. Spinway will cease operations as an ISP.
Clearly, free ISPs face an increasingly competitive landscape.
In December 2000, approximately 4% of Internet customers used a free ISP to connect to the Web.
Six months before, less than 2% tapped a free ISP. NetZero led the group of free services with 1.6 % market share, followed by K-Mart-sponsored BlueLight with 1.5% market share (See
Exhibit 2). In comparison, fee-based giants AOL and MSN continued to hold significant leads in the market.
Despite a slight dip over the summer, AOL still claimed about 7% of the market;
overall, MSN had been on the rise, claiming about 3% of the market.7
Free ISPs are characterized by the revenue model based solely on gains from advertising.
Therefore, primary sources of revenue for NetZero are media fees, direct marketing agreements, referring users to partners' web-sites, enabling customer registrations for partners and facilitating electronic commerce transactions.
Since NetZero launched its Internet access in October 1998, its revenues have grown to $55.5 million, and its number of users has reached 7 million.
However, such significantly accelerated user growth has resulted in a widening of the company's net loss.
Net loss for the most recent fiscal quarter topped $43 million (See Exhibit
3). A significant portion of the company's revenues are generated from third party sales organizations.
Thus, 28 % of total revenues were generated from the agreement with Looksmart, and 26% from banner advertisements sold through Adsmart.
Many of the companies that NetZero depends on in generating revenues are characterized by the Internet-based business models.
Recently such companies have come under financial pressure and have not been able to access the capital markets to fund their operations.
This trend could impact NetZero's ability to
generate revenues in the future.
At the dawn of 2000, many Internet companies have begun to falter and, in view of that, are reducing spending plans from highly aggressive levels. Various technology industry sectors are beginning to feel the pinch of weaker economic growth, so they pull back from advertising spending, bringing the prices for advertisements and, consequently, NetZero's revenues down. Mainstream businesses, in their turn, see little reason to spend money for advertising online, when traditional media like TV offers space at cut-rate prices. Under these circumstances, it became clear to NetZero's management that the days of double and triple digit revenue growth are gone and that now they are facing the challenge of finding new ways of operating in a now reality-based industry.
Upcoming Decisions
NetZero has been extremely effective in gaining new customers and is now facing new pressures due to these increased user numbers.
As the member levels increase, so too does the costs of doing business. The ability to pay for these increased expenses seems more and more unlikely to come from the advertising money that NetZero currently relies on.
The recent downturn of the e-commerce sector has dramatically decreased the amount companies are willing to spend on online advertising.
While it is true that as their customer base expands, so too does their appeal to market research companies;
however, the gains associated with that form of income do little to match the exponential growth of the firm's operating cost.8
In order to properly correct this situation, there must be a re-evaluation of the firm's revenue model.
NetZero cannot expect to survive in this tough economic environment if they cannot reverse the losses they have been posting since the company's inception.
Ronald Burr and recently hired CEO Mark Goldston had been pouring over
the tough decisions that needed to be made soon. NetZero had taken many steps to position itself as the premier free Internet service provider in the market.
"Defenders of the Free World" was the marketing slogan that Brian Woods had helped develop in their first year of operation, and now it seems as though they might need to rethink that position.
It is obvious to Ronald Burr and Mark Goldston that NetZero's revenue model is just not going to deliver the level of cash inflows that would be necessary for them to continue to grow into the future and compete with the likes of the ISP colossus, America Online.
If the necessary funds are not going to come from advertisers, then there are only limited directions that
Mr. Burr and Mr. Goldston could take the company.
Ronald Burr initiated the drive towards free access back in 1996. He and Marwan Zebian looked toward the network TV model for revenue generation, and believed that it was applicable to the Internet.
They were not alone in their assessment. "This is a no-brainer. I think over time this
free Internet access will evolve so that existing Internet service providers that are currently charging their customers a monthly fee will probably become
free," Rich LeFurgy, chairman of the Internet Advertising Bureau.
Now Burr sees that the market is likely to move in the opposite direction.
He and Mr. Goldston think that there is no way around it, they are going to have to start charging for service.
NetZero cannot sustain a deficit for much longer, and without another source of revenue,
the company will not be able to correct that trend. Given the fact that the company went to great lengths to market itself as "Defenders of the Free
World", how can they pull a 180-degree turn on the market and keep their impressive customer base?
Mr. Goldston reviewed the two proposals that he would present at tomorrow's
meeting:
Charge for Heavy Use Customers
Since half of NetZero's telecommunications cost is coming from only 12% of their heavy-use customers, NetZero could begin charging a monthly fee for users whose online times exceed a certain limit. What should that limit be, and how much should they charge were decisions left to be made. Some estimates show that each of these users costs NetZero from $10 to $15 per month per user in telecommunications expenditures alone. Should they price their heavy-use fees at a premium to that cost, say $18/month? AT&T currently charges $14.95 for their access, and AOL is around $20/month. Also, what was the free access limit to be set at? Mr. Goldston thought that 60 hours per month was a level that would affect only a limited amount of their current customers, but would provide an adequate revenue boost. Stacy Haitsuka believed that 40 hours was a more accurate time limit, "Our research shows that the majority of our users access the Internet from 10 to 25 hours per month, with another 20% in the middle range of 25 to 40 hours. These 'middle rangers' are not a consistent customer sample, however. Most months, there is a blurring of average to middle range users. Those who access the Internet 40 hours a month are fairly consistent about that level of online time. These people are online a lot, and understand the value of that access. They will be willing to pay, especially if they believe that the service will benefit from those fees."
Flat Monthly Fee with No Ads
Another option would be to provide a service where customers would pay the traditional flat rate each month for access. Their online time would not determine whether or not they pay. Mr. Goldston believes that this option would take much more finesse. He suggests that they offer this service as optional, with the following value added: no banner ads for those who sign up. These customers would be paying for the privilege to surf the web without the admittedly annoying presence of the ZeroPort advertising display window. There is also the matter of price. Should they charge an amount in-line with the pay ISP leaders or should they compete with these leaders by offering their service at a reduced price? Also, what would be the effect of a move to advertisement-free access on their current advertiser relations? Would they lose more than they could gain by moving in this direction?