COMMENTARY -- Juno Online Services (Nasdaq: JWEB) can't make money from charging nothing, so the company wants to turn its free Internet access subscribers into an unpaid workforce.
The late ྖs bull market turned out to be the world's largest college party. Those who indulged too much--that would be most of the U.S. investing population--found themselves in bed with someone who looked a lot better back when the drinks were flowing.
Free ISPs may have been the biggest beer goggle fantasy of all. No publicly traded ISP except America Online (and Mindspring Enterprises for awhile) was turning a profit from paid service, so someone decided the only recourse was to stop asking end users for money.
I suppose that could be construed as a logical conclusion in some circles. By the way, have another drink.
Fortunately from an investor's perspective, the keg ran dry before too many of these services could rob shareholders through an initial public offering. But as consumers, let's toast Freewwweb, WorldSpy, Spinway and their ilk; I enjoyed them while they lasted. I will miss reading WorldSpy's homepage that fed us such useful tidbits as sports scores from China. I long to watch the Judds sing for K-Mart on a grainy streaming video while Spinway dials me in for BlueLight.com.
Remaining members of the Free Internet Club have tried desperate measures to live with a sobering market. They acquired failing competitors in an effort to reach a profitable scale; limited access to a few hours per month; sued each other over an advertising window ignored by all users, save for clicking on it every 30 minutes to keep the Internet connection alive.
But at least one free ISP is being creative.
Juno boasts more than 3 million active free subscribers, or more than triple its paying customer base. The company hopes to make money by using its free members for something besides demographic surveys. The company wants to emulate SETI@Home's "Find ETs on YOUR computer" project.
In return for free access, Juno Online customers would agree to lend their PCs for distributed computing projects. Juno gives you an Internet connection; you give them some processing power for a scientific screensaver.
Juno hopes to charge researchers who need massive computing power, starting with biotech scientists hoping to produce drugs from the Human Genome Project.
It's a clever association. Internet isn't the Next Big Thing anymore? No problem--just hook up with another hot market. Best of all, Juno doesn't need to come up with any new technology; the company plans to adapt its software for the aforementioned (and patented, the company is careful to note these days) advertising window.
"Juno's management believes that the unused computing power of its free subscriber base represents a potentially valuable asset from the viewpoint of both potential revenue generation and potential contribution to society," declares the company.
Make money, change the world and pay the main workforce nothing. Even Steve Jobs can't claim that last part.
Company executives hope new, imaginative projects like this one would make up for the widely reported online advertising slump. Juno's revenue per free ISP user fell to 95 cents in the fourth quarter, down from $1.10 in the third, and it will keep falling; the company's advertising backlog tumbled 57 percent in the December quarter, to $12 million from $28 million at the end of October.
Cost cutting measures help a bit, but Juno recognizes that's not enough. "The full impact of these steps will probably not be realized for several quarters, and management currently expects revenues associated with the free service to continue to be exceeded for some time by the sum of the expenses reported..."
Juno spent $1.38 per free customer in the fourth quarter. Assuming the gap between advertising revenue and network expenses remains constant (an unrealistic assumption, granted, but it's all we have to work with), the company would need an additional 43 cents in revenue per user, or more than $1.3 million, to breakeven on its current set of free(loading) customers.
Doesn't sound like much, does it? On the other hand, no one knows how successful this will be. I wonder how many users will go for this deal.
Collating SETI's (Search for Extraterrestrial Intelligence) radio signals from space is one thing. It appeals to the sci-fi geek in us and works toward a non-profit cause.
Helping biotechs and pharmaceutical companies churn out drugs with huge profit margins doesn't seem quite as ennobling, especially if you have to keep your PC running all the time, exposing it to Evil Network Villains, and eating up electricity even as the home state of Silicon Valley suffers through a power crisis.
On the other hand, I'm sure it sounds like a good idea after a few drinks. 22GO>