Received from Arthur Goldstuck of Media South Africa in response to my e-mail querying X-Stream:
This story on the topic appeared in one of our publications:
from media.toolbox (www.mediatoolbox.co.za):
FREE4ALL IN ZA-LAND?
Herman Manson takes a look at industry reaction following the
announcement
that X-Stream will be launching a free Internet service in South
Africa.
VIP Internet Services, a small Cape-based ISP, is making waves
after
announcing a deal with UK-based X-Stream Networks that will see
it provide
free Internet access in South Africa. In an interview with 24.com,
X-Stream MD Dawie le Roux stated his intention to sign up 120
000 users to
his network within a year. Users will get free dial-up access in
return
for supplying the company with detailed demographic information,
which
will be used to send targeted banners to the subscribers' desktop.
X-Stream plans to profit solely through advertising revenue.
M-Web was the first to respond by sending out a media release
entitled
"M-Web speaks out on 'free Internet.'" M-Web basically expressed
doubt on
the capabilities of a free Internet provider, while trumpeting its own
services. In a later statement, a spokesperson for M-Web
reiterated its
belief that there is no such thing as a free lunch. "The model of
so-called 'free Internet' means that subscribers may be bombarded
with
advertising and they may be made to pay high charges for calls to
service
centres. It could also mean that subscribers will not be offered any
significant content proposition by the particular service provider."
Ironically, M-Web registered <http://www.freeaccess.co.za> and
<http://www.free4all.co.za> on March 15…
A spokesperson for The Internet Solution, owners of popular dial-up
ISP
Icon, expressed doubts about whether X-Stream will be able to
attract
enough users to draw sufficient advertising revenue to support it.
"Our
population is smaller than those of the US and UK, for example,
and the
proportion of people who are able to connect is smaller. Even if the
access is free, the PC isn't."
The MD of Hix Internet, Steven Mazabow, threw subtlety to the
wind and
pronounced X-Stream "doomed" in a telephone interview on
Tuesday. Mazabow
claims that X-Stream will have to pay Telkom, on whose network it
will be
piggy backing, R40 per user per month. If X-Stream signs up 120
000 users
in its first year, they would have to fork out R4,8 million a month
within
12 months. Online advertising spend in South Africa is expected to
reach
only R25-30 million during the whole of 1999.
"Obviously the advantage in Britain is that BT gives service
providers a
kickback on the local phone call which provides a solid, bankable
revenue
stream," says Electric Ocean's Stephen Garratt. "Unfortunately,
Telkom's
billing engine cannot support this. Selling ads is not bankable as a
revenue stream as while your banner inventory may go up your
sales of that
inventory may not go up. X-Stream SA had better have a good
sales team."
Garratt says he has two separate programming friends who have
written
cracks for the X-Stream software to make sure that the client runs
as
"always minimised," which means that X-Stream's advertisers will
not
actually get their money's worth.
I think we have pretty much established that a service relying on
only
advertising money for an income is unlikely to succeed. What we
should
keep in mind is that free Internet access is by no means a dead
business
model. It is early days, and retailers, who could add real value to
this
model, have yet to enter the picture. Retail groups like CNA or
Dions, and
even financial services companies, might decide that free Internet
access
would add enough value to their customer relationships to make it
a viable
proposition. Data mining opportunities would be immense; not to
mention
increased customer loyalty and sales opportunities. Dixons (a
retail group
in the UK) has already proved this model can work.
I suspect local ISPs will increase their efforts to partner with
retailers
in such ventures. Their future might well rely on it.
M-Web registered the following domain names:
<http://co.za/cgi-bin/whois.sh?Domain=freeaccess>
<http://co.za/cgi-bin/whois.sh?Domain=free4all>
-- subtle, very subtle…
Web developer Electric Ocean registered
<http://co.za/cgi-bin/whois.sh?Domain=freeinternet> |
