The net access component of the free pc plan is doing nicely-Netzero!
BUSINESS WEEK ONLINE
February 17, 1999
Tired of Monthly Net Charges? NetZero Has a Deal for You
This Internet service provider is free, but you have to agree to see ads -- constantly -- while using it
Free. To consumers it's a powerful word, so powerful that many Internet companies are capitalizing on it: Free E-mail, free trial memberships, free "content." Now comes the next-level freebie: Free Internet access. NetZero Inc. in Westlake Village, Calif., thinks plenty of Net newbies and veterans alike object to paying even $20 a month for an account with an Internet service provider (ISP). And it plans to capture them with Web access that's -- what else? -- free, then make money by advertising to them.
Like other ISPs, NetZero gives subscribers special software that provides complete access to the Net and includes a free E-mail account. The software is, of course, free to download from the NetZero Web site, at www.netzero.com. If you don't want to spend whatever time it takes you to download the nearly 3.3-megabyte file, NetZero will mail you a CD-ROM for a shipping charge of $6.95. But aside from that, there's no cost for joining up.
Since NetZero depends entirely on advertising, however, it exacts some minor noncash tribute from its customers. It requires them to fill out an online registration form with 22 mandatory questions that ask, for example, for the customer's name, home address, home phone number, marital status, and annual household income. If you don't answer the required questions, you don't get NetZero's free services. The information allows the company to develop a demographic profile -- which it will use to determine what ads to show to individual subscribers.
600 POINTS OF PRESENCE. These are unusually sticky ads. About the size of a common Web-site banner ad, NetZero's ad window can be placed anywhere on the subscriber's monitor but can't be minimized, moved off-screen, blocked by other windows, or otherwise hidden from view. Try to close this "floating" ad window and your online session automatically ends.
Of course, NetZero goes to great lengths to prove that it isn't really nosy. Its two-page privacy policy (www.netzero.com/profile/privacy_policy.html) outlines how and why it gathers subscriber information. It also promises that at no time will individual names or other personalized information ever be associated with specific browsing patterns or traffic data. Nor will such information will ever be passed on to advertisers or NetZero employees. The company has even applied for approval from TRUSTe, an independent nonprofit Net organization that reviews and gives a seal of approval to Web sites that maintain sound privacy policies and practices.
For those not put off by its quid pro quo, NetZero is an interesting alternative ISP. It has more than 600 "points of presence" -- U.S. access points to the Internet provided by national telecommunications and network companies GTE and Ageis -- so chances are good that there's a local dial-up number in your area. While some areas, such as Maine may have only one access number, most NetZero subscribers -- especially those in metro areas -- will find that access is as good or better than that provided by other ISPs.
In New York, for example, I was able to log onto the Net at access speeds above 45,000 kbps almost every time. And there are seven local access numbers in the New York City area (with five more being tested), so I rarely got a busy signal or ended up disconnected. That's partly because, just like America Online (AOL), NetZero discourages subscribers from staying online. Every 30 minutes, a window opens asking if you'd like to stay connected. Fail to answer within 60 seconds and you're disconnected, even if you're in the midst of downloading a file or an online game.
PLENTY OF FAULTS. Oddly, perhaps, I really wasn't bothered by the NetZero ads. Although I couldn't move the 1-inch by 4-inch frame off my screen, I could make room for it by removing the standard Windows task bar and buttons. The NetZero software can even remember where on the monitor you placed the ad frame last and make that the default location every time you log onto the service. What's more, although I filled out the personal profile truthfully, I didn't encounter any ads that I thought were examples of Big Brother at work.
While Netzero claims to have more than 40 companies ranging from Nissan to BellSouth to eBay as advertisers, I seemed to keep running into the same ads for 2.9% credit cards, kiddie software, a wedding dress (from the weddingchannel.com), and telephone services -- goods and services that I had no interest in, and ignored. Finally, even though NetZero is blasting ads every 30-seconds or so, that doesn't seem to get in the way of serving up Web pages or delivering other Net data. In fact, due to the higher connect speeds, NetZero at times seemed to be a faster ISP than AOL. And during peak times, I still managed to connect to NetZero's access numbers on the first try -- much better than the four or five tries it usually takes me with AOL.
Still, NetZero has plenty of faults. For one, setting up the software isn't nearly as easy as installing AOL. Even though the software automatically installs itself onto the hard drive, you still have to make manual adjustments -- mainly creating a dial-up network connection using software components that are built in, but not necessarily pre-installed on your PC's hard drive as part of the Windows 95 or Windows 98 operating systems. (NetZero is currently available only for PCs running either Microsoft's Windows 95/98 or Windows NT.)
And while the help file seems to walk you step-by-step through the process of setting up Microsoft's dial-up networking, it's missing the last few, crucial steps. This means that unless you're technically inclined, you'll end up banging your head against walls trying to figure out why they keep getting an error message that says: "Configuration error. Please contact tech support." Worst of all, the help file doesn't offer any hints on how to contact tech support. You'll have to turn to the NetZero Web site (www.netzero.com/support/index.html) for the complete installations instructions plus the toll number (yes, you have to pay) to NetZero's support line -- which the company concedes isn't staffed at all times.
RAPID GROWTH. Can a free, ad-based Net service be long for this world? Already, other attempts have failed. Cincinnati-based Tritium Network suspended its free service last year, stranding 100,000 customers. And Bigger.net in San Jose, Calif., filed for bankruptcy protection last October after three years in operation, leaving 400,000 subscribers in the lurch.
Officials at NetZero are confident that they can succeed where others have faltered, however. For one, while other free ISPs have been regional, NetZero was designed to be a national ISP. And although NetZero's service isn't yet ubiquitous -- you get can't it in Alaska or Hawaii -- its growth has been phenomenal. Since launching last October, it has attracted 350,000 subscribers -- without advertising itself. While the company won't disclose its revenues, it claims that they're "exceeding expectations," and that December's figures were double November's. Such rapid growth has also helped the 40-person company attract a second round of financing from the likes of Draper Fisher Jurvetson, Foundation Capital, and Idealab Capital Partners.
Soon, the company plans to launch an online ad campaign. And by later this year, NetZero may have deals with several computer hardware and software makers to include its signup software on their products. It also is working to deliver a free ISP service for Apple Macintosh computers. For an ISP, however, rapid growth is a mixed blessing. While NetZero is already working with GTE and Ageis to add more access points, a spurt in subscribers could cause the same service-crippling outages that once plagued AOL. Of course, the difference between NetZero and AOL can be summed up in the old saying: Don't look a gift horse in the mouth.
By Paul M. Eng, senior correspondent, Business Week Online
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