About 100 million people in the United States had signed up for Net services by the end of last year. An additional 100 million people will sign up in the next five years, analysts say.
This next 100 million are the most mainstream of the mainstream--the non-technically savvy who have resisted the CDs in their mailboxes and the dot-com ads saturating TV and radio stations. That puts them squarely in the consumer category dominated by AOL.
The trick for the rest of the ISP industry is to ensure that this last valuable resource of untapped subscribers doesn't simply default to AOL. The giant already has nearly 10 times more subscribers than its nearest rival--and the marketing muscle to match. In response, rivals are getting increasingly creative, with such strategies as free services and "affinity" relationships with sports teams and bridge clubs.
Analysts say these kinds of strategies can work, but probably not for many companies.
"This market is going to be dominated by AOL and a few other top-tier groups," said Zia Daniell Widger, an analyst with Jupiter Communications. "The window of opportunity is closing very rapidly for small ISPs who still charge $20 a month."
The window marks the end of what some executives in the industry call the last "virgin territory" in the ISP business. Wall Street and venture capitalists largely have turned their attention to high-speed and wireless Net services.
ISPs are still trying to figure out who these people are and why they haven't come online yet, so they can use that information to capture their loyalties.
AOL thinks it already knows the group. Company executives say the late adopters aren't markedly different from mainstream customers who have already swelled the company's subscriber roster beyond 22 million.
"We've certainly started to penetrate the mass market," says Jan Brandt, AOL's president of marketing. "The next 90 million are really just an extension of that."
But the company is covering its bases, reaching out to people who don't have PCs through efforts like its AOL TV service, slated to launch in June.
Analysts say that only a few other ISPs have the scale and strategies in place to take on such a large competitor.
EarthLink, fresh from a merger with rival MindSpring, is one candidate. EarthLink executives cite at least three factors that have kept people offline: lack of money, a fear of technology, and a lack of understanding of the Internet's value.
The company is trying to address the fear issue by making its software far easier to use and is spending millions on advertising to educate people about the Net. But it will be a slow process, executives say.
"The floodgates aren't going to open for the next 100 million," said Tom Andrus, EarthLink vice president of product management. "There are a lot of reasons why they're not into this."
Another possible winner is Juno Online Services, which until late last year was almost entirely an email provider. But with a new mix of free and paid Web services, along with the starter email-only service, Juno is explicitly targeting the late adopter market--perhaps more than any other company.
"There is an opportunity that will not last forever to fill that gap to the right of AOL," Juno chief executive Charles Ardai said. His service has more than 3 million active subscribers distributed among the email, paid and free Web services. He said he'd rather keep drawing from this late adopter market, which he believes will be more loyal than early adopters who jumped from service to service.
"If we can pick them off from AOL, someone can pick them off from us," Ardai said.
Another fast-growing company is OneMain.com, an ISP focused on rural and small-town areas where Internet penetration is low. In 60 percent of the markets served by the company, a phone call to the nearest AOL modem is long-distance, providing considerable opportunity for competitors, chief executive Steve Smith says.
Free ISPs like NetZero and wholesalers like 1stUp.com also are drawing millions of people into their ranks, much more quickly than paid service providers. NetZero, for example, has signed up close to 4 million people in the past year and signed 1 million in the last quarter alone. Actual usage is considerably lower, although still respectable: The company said that about 1.8 million people accessed its service in March.
Lurking behind these companies' plans is the issue of the people being left out in the rush to the Internet--a phenomenon that has sparked headlines and caught policymakers' attention in recent months. Congress and the White House have spotlighted what they call the "digital divide."
Although this divide is certainly real--some groups will lack access to computers and Internet connections for the foreseeable future--analysts say the gap will slim considerably in the next few years as computers become cheaper, companies begin giving PCs to employees, and free Net services take off. Jupiter Communications predicts that 194 million people in the United States will be online by 2005, compared with 104 million at the end of 2000.
The vast majority of these people will still be dial-up subscribers, particularly those who are coming onto the Net for the first time. But even as high-speed Net services gain in popularity, it's worth seeking the dial-up subscribers, analysts say.
"I think they will continue to try to target this market," Jupiter's Widger said. "Today's short-term dial-up subscriber might be tomorrow's long-term broadband subscriber."