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Technology Stocks : NetZero Inc-(NZRO) -- Ignore unavailable to you. Want to Upgrade?

To: Glenn Petersen who wrote (156)	10/4/1999 11:37:00 AM
From: Brasco One	Respond to of 513

<!>Spotting a business plan full of holes and an unworkable premise, they roundly panned the company.<!> Great article. Thats what I have been claiming. Everyone knows that this business model is vague. And I really doubt a CEO from a begal shop will do the job for this company.

To: Glenn Petersen who wrote (156)	10/4/1999 12:12:00 PM
From: PartyTime	Respond to of 513

Media Pegs NetZero a Loser and Its IPO Zooms >>>No wonder the media is a neurotic mess. After cheerleading for scads of dubious dot-com businesses, financial writers finally found their collective spines when it came to NetZero, the free ISP service. Spotting a business plan full of holes and an unworkable premise, they roundly panned the company. But their skeptical observations were drowned out by the sound of investors stampeding in and scarfing up 10 million shares of NetZero on opening day.<<< The Industry Standard writer obviously has little faith his or her colleagues? Who is the author, by the way? >>>Here's how NetZero works: Web users fill in a form describing themselves and their demographics, and then agree to watch a parade of banner ads in exchange for free Net access.<<< Wrong. NetZero does not offer a parade of banner ads. It offers only one banner ad. Other sites, including paid ISPs, offer many more ads on a single page. >>>In the wild and woolly world of the Net, companies have gone far with a lot less. But in the light of day, NetZero's premise starts to look really bad really fast. For starters, it snags half its revenues from just two contracts, one a cobranding contract with LookSmart and the other an ad agreement with AdSmart. That's always risky, Individual Investor Online's Craig Schneider pointed out, but in this case, as the companies grow into big-time clients, they can push NetZero around or leave it all together.<<< Gee, that didn't affect Doubleclick (DCLK) when it came public with most of its business generated from one client, Altavista. Banner ads drew criticism then too, didn't they? Incidentally, Doubleclick now trades over 100. >>>Analysts were unenthusiastic about the prospects of free access. "[W]e're not placing tremendous faith in the longevity of this business," the Yankee Group's Emily Meehan told Schneider. "How many advertisers really want to hit the cheapskates?" chimed in Morningstar analyst Pat Dorsey.<<< The same advertisers who'd advertise on ABC, CBC, NBC and Fox, that's who! >>>A more important question is whether the pennypinchers are even logging on. By Aug. 31, NetZero had 1.68 million users, but only 891,000 used the service all month, ZDII's Larry Dignan noted. Where were the others? Probably using other ISP accounts, the company sheepishly admitted.<<< Once paid ISP accounts expire, the NZRO user will have the option of dropping the service. Also, subscribers want to establish a sense of faith with a free ISP service since it is so new. If a free service offers what a paid service offers this choice will become easy. Especially with the advent of other free services such as Altavista. In effect, the free ISPs will end up becoming backups for each other, rather than having one paid and one free. >>>Dignan called NetZero a second-string ISP that could be a key player in pressuring other ISPs' profit margins. Analysts have twice downgraded AOL (AOL) partly as a result of the free spree. But MSN bucked the trend when it announced plans to raise its monthly fee to $21.95.<<< Since when is a Cisco-fired system a second string system. And what's wrong with having 1,900 telephone hookups nationally? What's AOL got? Microsoft simply showed a savvy business strategy by raising prices instead of decreasing prices. It's one way to starve off the advernt of free ISPs. Indeed, both America Online and Microsoft are circling their wagons. >>>Investors didn't care. NetZero's stock opened at $16 and trader enthusiasm drove it up another $13 during the day. The media kept up the anti-free campaign. After the IPO, Redherring.com's Tom Davey pointed out that NetZero's real potential and stock value is as a takeover target. A merger with EarthLink and MindSpring is a possibility, but a buyout by a big daddy like AOL is more likely. By week's end, even AP had jumped on the story. "[T]here were strong signs that the newcomer's main product ... may not be the wave of the future after all," David Kalish filed in a report for the wire service. But investors would have none of it. On Thursday, NetZero's stock closed at $26.<<< NetZero, from its IPO, now has the power to buy the Earthlink-Mindspring combo. Also, monies raised from the IPO will enable it to nationally advertise whereas it previously signed its 1.7 million subscribers using word of mouth only. Conclusion: America Online and Microsoft have a huge core of investors, both institutional and individual. They won't go down easily and a lot of mud is being thrown. The Industry Standard account is but one example. It's my belief that NetZero will survive such a vicious onslaught and continue to build its subscription base as the paid ISP subscription bases respectively decline. There will be changes and they will be very big changes. But it'll be the power of NZRO's free service which will set the tempo for this change, whether it is acquired or not.