AltaVista today said it is offering free Internet access, resurrecting a business model that failed in the United States in the past but has taken off in Europe of late.
As first reported by CNET
News.com, the ad-supported dial-up service is being offered in conjunction
with start-up 1stUp.com.
The move comes during a tumultuous time in the Internet access business, as
heavy hitters such as Microsoft, America Online, AT&T, and others are
constantly tweaking their business models in an effort to win over as many users as possible.
It also represents a departure for AltaVista and for portals in general. Though some, such as Yahoo, offer cobranded access with Internet service providers like AT&T WorldNet, those services still come with a monthly fee. AltaVista, in tying its service to free access, is hoping to grab a consumer audience that so far has largely eluded it, according to Patrick Keane, an analyst with research firm Jupiter Communications.
The free access model "might make sense for AltaVista," Keane said today. "I've been saying Yahoo should get into access as a loss leader," because it is a boost to customer acquisition.
It also allows the portal to gather more data about consumers, which in turn lets it offer more targeted advertising. Portals can charge advertisers more when they can provide deep demographic data about their audiences.
In addition, portals have been counting on an ever-growing list of services
such as free email, calendars, and chat to gain users' loyalty, but "I'm
not convinced those services are enough to keep users," Keane said. "Right
now you're not tied to any of these portals. But access is something that
will keep users."
Portals and ISPs are having to work harder to gain users as competition in the Net access game has extended to other players, including hardware and software makers. Microsoft, for example, is offering $400 rebates on computers for buyers who commit to multiyear, fee-based contracts for Internet access with its MSN Internet service.
The free Internet access model has taken off in Europe in the past few months, led by the United Kingdom's Freeserve, which launched in September 1998. Those services technically are not free because users still have to pay phone tolls for dialing in to the Net, of which the access provider collects a cut--but they do represent significant cost savings for consumers.
In response to the popularity of "free" access in Europe, AOL's European division slashed prices in May. Then, last month, it said it planned to launch a free service in the United Kingdom, dubbed Netscape Online.
So far, companies offering free, advertising-supported Internet access have come and gone in the United States but have largely been unable to financially sustain the business. But Jupiter's Keane noted that AltaVista is different from those firms in that the access portion of the business is not all it will rely on as its financial lifeblood.
In fact, the free access potentially could boost its core business, because AltaVista could sell a more loyal audience and greater demographic data to advertisers.
"All indications lead us to believe this will be a tremendous offering from AltaVista," Rod Schrock, chief executive of AltaVista, said in a statement. "We anticipate an immediate, overwhelming demand for this integrated, totally free Internet service."
Along with the free service, AltaVista said it is launching a MicroPortal, as reported earlier. The MicroPortal is a separate window on a user's desktop that provides customized features such as news headlines, weather, and stock quotes, along with search and e-commerce, the company said. The My AltaVista personalized page will be the start page for users of the free access service, AltaVista said.
AltaVista's FreeAccess service is available to users with Windows 95 and 98 and will be offered to Windows NT and Macintosh users soon, the company said. In addition, it said the advertising that supports the free service involves rotating ads in a window that takes up less than 5 percent of the user's screen. The user also can move the advertising to anywhere on the screen.