Free ISPs fight economic woes

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While free Internet access took root in 1999, in 2000 it seemed to flourish until it was slammed with a softened market for online ad sales and unhappy investors.

Worse hit were the co-branded free ISPs 1stUp.com Corp. and Spinway; lacking cash reserves, both suddenly shut down their operations this fall, leaving a number of marketers scrambling to find alternatives.

Some of 1stUp.com's partners steered their customers to paid alternatives, such as AltaVista Co., which struck a deal with Microsoft Corp. for its MSN service. Excite@Home and Lycos are still searching for free ISP alternatives for their users.

When Spinway shut down, Kmart's BlueLight.com agreed to buy its key assets and continue a version of the company's free service. Spinway had more than 5 million subscribers with partners, including Barnes & Noble, Costco Wholesale Corp. and Spiegel.

However scarred, the free ISP business model is not dead. NetZero, the leading free ISP with 5.7 million registered users, battled a downturn in ad sales and sagging stock prices, with its shares trading last week at around $1 each.

But Mark Goldston, chairman-CEO of NetZero, was upbeat about the company's prospects. He said there's no turning back for people who've tasted free service.

Copyright December 2000, Crain Communications Inc.

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