This article in the Washington Post got me musing about M2Z again (see this earlier post). NetZero, a company that was founded during the Internet boom in the late 1990s with a business plan of ad-supported service, still offers the service. Juno was also in this business; both have since been acquired by United Online. According to their financial reports, they received $70.2 million from "billable services" and $11.5 million from "advertising" in the "Communications" category. The billable services have shrunk by $15 million over the past year in this category, while the advertising revenues have stayed relatively constant. Their paid accounts have declined to approximately 2,000 from 2,500 in the previous year. They do not report on free accounts.
So, given this, what would you say about M2Z's business prospects? Is the experience of United Online a useful analogy?
4 comments:
From the surface, the comparison is not relevant for several critical reasons:
1) Netzero, and Juno provide a dial up business. Even back in 1999, this was a service that people did not like. M2Z is offering free service at a rate of 384 Kbps vs for a dial up maximum of 56 Kbps.
2) M2Z is offering a wireless service that will incorporate portability and near universal availability
3) If I recall correctly, Netzero used to plaster ads all over their web presence. I would hope that M2Z will use more subtle and less intrusive ad placement, etc.
The bit rate is indeed different, which could limit the usefulness of the analogy between the two cases. But when NetZero and Juno first emerged, it was not unlike the current model of M2Z.
I would also hope that M2Z would be more tasteful in their ad placement (this could be problematic given Adblock). The alternative, I guess is to do some kind of data mining on user's usage patterns and use those for revenue generation.
Juno, at one point, required the use of their screen saver. They had the idea of selling your idle cycles, along the lines of SETI@Home. As far as I know, this didn't amount to much.
The answers seem to be easily found at:
http://www.m2znetworks.com/faqs/
Q: If it's a free service, how will M2Z make money?
A: M2Z will offer the free, wireless (over-the-air), family-friendly (filtered), service at speeds of 512 kbps (384 kbps for downloads and 128 kbps for uploads). This is competitive with low-end DSL and about 6 times faster than conventional dial-up.
* Advertising revenue will support the free service, using local geo-tagging for highly relevant non-intrusive search results (i.e. searching "pizza" will give you the local pizza place down the street and not a Pizza Hut in another city or state)
Martin,
This is John Muleta, CEO of M2Z. I think that other folks have responded thoughtfully but I wanted to amplify a couple of quick points.
1. the point of innovation is to learn from the experience of Net Zero and Juno...therefore, we do not sell ads to our free users. We plan to be partners with internet search engines and become their partners.
What we plan to do is to pass zip code level information about the location of our free users to our search partners who will use that information to enhance their search engine results with location relevance and we would share revenue with the ad engine (e.g., YHOO, GOOG, MSN, ASK, Snapfish, etc.). Location info, as long as it is done on an opt-in basis and as long as it is not granular, is a great win/win for the end-user, the local search ad buyer, the search engine and M2Z. This allows us and our "wholesale" partners to cost effectively pay for the "free" network. Since we don't take any government subsidies and are willing to pay for the lease of the spectrum, why not innovate in this manner. If it works, then it will drive this type of access model throughout the industry.
Why won't incumbent carriers do this? Because they don't innovate and they don't want to partner with anyone on a win/win basis (that's the incumbent mentality).
2. the critical point of broadband is that its "always on" and that is an enormous value differentiator. The other value differentiator in telecoms is mobility/portability which can only come from spectrum based services.
Combining these two elements with a disruptive pricing approach ($0), M2Z will drive down prices in broadband or force the current broadband duopolists to improve the value of their services.
Finally, its important to remember that increasing competition increases consumer welfare and the focus on our business plan's likely success should not be the overriding public policy debate. The point should be to reduce barriers to market entry and exit so lots of innovators, not just M2Z, get in an jazz up this torpid broadband market.
Getting a fair, pro-competitive, and transparent spectrum policy while pushing more spectrum into the hands of new entrants should be our highest policy in telecoms.
Take care.
John
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