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CompuServe Web effort to leverage strengths

Analysts say CompuServe's new Web-based offering for business and professional users, distinct from its two Net services, can't hurt the company.

It can't hurt and it might actually help a lot.

That's how some analysts are viewing "C," CompuServe's (CSRV) new Web-based product that executives outlined today. (See related story)

The company is aiming to capture business-savvy, relatively more affluent, and more educated online users, which it estimates to be about 36 percent of the roughly 30 million people already on the Internet.

"For our audience, this is going to be the best addition to the Web for a very long time," said Sam Yuretsky, CompuServe's vice president of business management.

Executives at CompuServe emphasized that they are not doing the same thing that the Microsoft Network did when it moved its members onto the Web a year ago. Instead, CompuServe intends to launch the Web-based C service separate from its two existing services: its proprietary online platform, dubbed CSi, and its Internet access service called Sprynet.

They also said they could not talk about how this move would be affected by CompuServe's the pending sale to online giant America Online (AOL). The Justice Department is reviewing the sale for potential antitrust violations.

CompuServe has structured C Special coverage: The selling of CompuServe so that there are three levels to the service. The idea is to get users to try the free areas, luring them there with deals with other Web sites and companies. Then it can work to draw them into areas where they actually pay for content.

The first tier will allow anyone a free peek into some content and forums, but they won't be able to participate. This tier relies on advertising alone to generate revenue.

The second level is called membership. That is also free, but requires registration with a credit card and gives users the ability to buy stuff off the Web. The transactions would give CompuServe a second revenue source.

The third tier require members to actually subscribe. For less than $10 a month, they would be able to access and contribute to all forums as well as browse proprietary information. Within that tier, members can also sign up to get extra communications packages, such as fax and messaging capabilities, and get special information aimed at computer professionals.

But don't expect C, to be launched by the end of December, to shake up the Internet landscape. While it might attract business and professional users, analysts don't expect its impact to be profound.

On the other hand, CompuServe has little to lose and everything to gain by making this offering. "The costs in creating the service are minimal," said Brian Oakes, an analyst with Lehman Brothers. "It's kind of like, 'Why not create this service?' It can't hurt."

CompuServe has never been able to regain momentum in the marketplace since its failed attempt at a consumer online service called Wow, which was aimed at the mass market.

Unlike its former rival and pending buyer AOL, CompuServe is aiming at those who already are online and have Internet access through an ISP or workplace. (AOL has always targeted the great masses of people who are new to the Net.)

It's hoping to use its core attributes--strong forums--to draw business and professional users who are already online, generally make more money, and are better educated--an audience that's much more attractive to advertisers and marketers.

"This is one of the more positive steps that CompuServe has taken in recent memory," said Mark Mooradian, an analyst with Jupiter Communications."They're attempting to extend what is for them a very valuable franchise, which is the forums...CompuServe desperately needs to expand its audience. They need to start growing."

While there are plenty of Web sites out there that aim to become the surfer's home on the Net, CompuServe feels like it has a special niche with business and professional users that will give it an advantage over its competitors.

However, MSN and possibly other comprehensive sites such as Yahoo and Snap (an online service and content aggregator that is a division of CNET, publisher of NEWS.COM), are not simply giving up on those desirable users.

Just as CompuServe says it will serve business and professional users in all aspects of their lives, other services also seek to serve all kinds of users, including the high-end ones.

While the pending sale to AOL might appear to be a stumbling block in CompuServe's strategic goals, analysts agree that C makes a lot of sense anyway. AOL executives have publicly stated that they plan to keep CompuServe as a separate service and to leverage its strength in catering to business and professional users.

Mooradian added he could even see a day where CompuServe is used to give AOL members added value or become an anchor tenant in AOL's channel lineup.

Either way, having a strong Web component certainly can't hurt CompuServe. Industry analyst Gary Arlen with Maryland-based Arlen Communications said it "still gives AOL what they want--a separate line of content aimed at a more serious business user. It's the kind of thing CompuServe has to come up with if it's going to survive at all."