Re: UKNM: The 'free' in free ISP now a commodity

[Ross Sleight]

Sam wrote (regarding Freeserve)


>What struck me apart from the size of the advertising campaign (which must

>be one of the biggest for an ISP?)


About �1.2 million rate card (according to Media Week if I remember).  Add

to this their TV and Press advertising and I reckon on a �3-4m spend if this

continues for the next 6-8 weeks.  AOL probably spent around the same mark

at Christmas, but mostly in TV.  Of course, AOL have been spending masses on

direct mail disk distribution for some time now.  Even though I have an AOL

account, I still received 4 disks mailed to me for 4.0 though....


>So, surely any company who is taking customer retention, loyalty, and

>direct/database marketing seriously should be creating their own ISP?


I don't think so.  To save time, part of my argument is at


http://www.zhong.co.uk/demo/zhong_opinion_1.html


But the same argument for why low content, low involvement products should

not have a website and should utilise other peoples audiences through

sponsorship/advertising etc, rather than becoming a publisher applies to the

free ISP market.  You still need to provide people with

content/service/utility on your free ISP - even moreso as these individuals

coming online are not as Internet aware as existing users.


>...or will the whole business model just disappear to the realms of big

>telcos...the early entrants aside? Is there any space left in the free ISP

>space for the new kids on the block? Aren't they wasting their time?


Well assuming that:


(i)    There are a finite number of current internet users who will switch

to an ISP (lets say 50% of current users, as others do not want to lose

service, e-mail address etc.)

(ii)    There are a finite number of people who want to come online in the

next year (that have the equipment, motivation, and believe they can find

value online)


There is a simple calculation which shows that there is only a certain

number of users to chase after for all players.  Possible situations:


(i)    Mass churn.  hasn't anyone else noticed that Freeserve announce 1.5

or so million users some time ago (Jan?  Feb?)  and what do they have now?

1.5 million users?  I'll predict churn is huge for free ISP's (please,

someone prove me wrong on this for the model's sake!), especially as users

have less stickiness on a free ISP than a paid for ISP (trust, brand values

and functionality)


(ii)    Increased specialisation of ISP - through demographics,

psychographics or context of content.  Look at madasafish - MP3/yoof crowd

targeted and content specific.  Look at Mutualnet - great idea for Net savvy

/financial market savvy users.  With specialisation comes niche ISP

players - and how do you make these profitable on a freeserve model?  You

don't - you build new models for revenue stretching deep into the area that

you are targeting.


(iii)    Telcos always win - they are providing the whole set up after all,

so they win no matter what happens in the market with regards to brand - the

more people online, the better for them.  And as Rick points out - when

xDSL/cable modems/fat pipes in any shape or format become a reality, who

cares who provides access - or what I should say is we are likely to trust

our telcos for this service rather than new operators or brands that have

stretched to a free ISP.  Certainly seems to have happened in the Gas/Elec

marketplaces....


R


Ross  Sleight

Zhong

rosszhong [dot] co [dot] uk

>Toodle Pip

>

>Sam

>-----------------------------------------------------

> Chinwag - http://www.chinwag.com


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