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PARIS -- Liberty Surf, a leading French Internet service provider, has put its estimated $16 million advertising budget into review just months after being taken over by Italian Internet giant Tiscali.

Liberty Surf is asking its current agency, Havas Advertising-owned @n-off, Paris, to rethink its strategy in a review that also includes the Paris shops of DDB Worldwide-owned Louis XIV, WPP Group-owned full service provider Y&R 2.1, and independent marketing services specialist Rouge. A decision is expected by the end of March with a new campaign likely to break in May.

Executives at Liberty Surf say that the advertising review is part of a wider strategy to turn their marketing and branding successes into positive financial results byyear-end.

Liberty Surf, which offers no-fee Internet access, has become France's No. 3 ISP, with more than 800,000 active clients since its launch in 1999. It is slightly behind, its pincipal rival in the no-cost access sector, which claims 900,000 active clients, but far behind French ISP leader Wanadoo, which reported 1.8 million active paying clients at the end of last year.

Liberty Surf CEO Rafi Kouyoumdjian -- bumped up last month from his general manager post in the wake of founder Pierre Besnainou's resignation -- has indicated that the company's marketing and technology budgets are likely to decrease in 2001, as part of the pursuit of bottomline results demanded by the company's Italian owners.

The company has yet to report financial results for 2000, but Mr. Kouyoumdjian noted that revenues were multiplied by 10 last year, reaching $56 million.

Mr. Kouyoumdjian also suggested that future marketing work will aim to "federate" a message for Tiscali's various French holdings, which also include ISP World Online, whose 200,000 clients are likely to be rolled into the more popular Liberty Surf brand in the coming months, putting the company well above the 1 million mark.

The Liberty Surf review is not the only indication that all is not well in the world of free Internet access.

French start-up Oreka has been forced to downsize a popular, all-inclusive, advertising-driven free Internet package launched in mid-2000. The deal -- known here as "free-free" -- aimed to couple free Internet access with free telecommunications costs for Net surfers willing to receive large amounts of targeted advertising.

Oreka, which was created and then marketed in very tight cooperation with leading executives at Grey Interactive, Paris, was swamped with more than 150,000 demands for the "free-free" service during 2000, but dwindling ad revenues and rising telecommunications costs prevented it from fulfilling all requests.

The company discontinued its free telecommunications offer March 1, pledging instead to reward loyal customers with telecom bonuses linked to time spent connected to the site.

Copyright March 2001, Crain Communications Inc.

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