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A battle is brewing to capture the online world's only killer application to date-e-mail.

Freemark Communications early next year will launch the industry's first free e-mail service complete with advertisers, content providers and distributors. The company has already assembled strategic partners like ESPN's Sports Ticker, Campbell Soup Co., Radio Shack, RJR Nabisco, CMP Publications and CompuServe's CompuServe Network.

Just a couple steps behind Freemark is another New York-based company, Juno Online Services, which also plans free e-mail service in 1996. Although Juno is still negotiating its alliances, it does have the backing of D.E. Shaw & Co., one of the industry's most well-funded investment companies. Shaw is poised to spend more than $100 million in the next two years to launch Juno.

Currently beta testing with about 5,000 users, Freemark has signed advertiser brands, including Nabisco's Planter's Peanuts as well as Upjohn's Rogaine and CMP Publications' NetGuide. A rate card has yet to be determined; however, deals can range anywhere from the tens of thousands of dollars to about half a million, said Doug McFarland, Freemark exec VP and general manager.

Each piece of e-mail will be delivered to Freemark users with an advertiser's stamp and a sponsor banner that can be clicked for more information. Freemark also has an alliance with Coupons Online and has partnered with Campbell to test the couponing technology.

"We've developed a service that has the technology to deliver to advertisers the specific type of person they want through the electronic threshold of their store," said Marv Goldschmidtt, Freemark VP-marketing. "We then offer tools [in the form of coupons, sweepstakes or information requests] to create their own calls to action with the consumer."

"The wonderful thing about Freemark is we can tailor specific offerings on a day's notice," said a Campbell spokesman. "It'd be great for launching a new product or supporting a print promotion. Freemark has already formed a partnership with Radio Shack, which will distribute the software needed to access Freemark's e-mail ondisks in its stores. The e-mail provider is negotiating similar deals with major automotive, fast-food and package-goods companies to enter similar distribution deals.

"Free e-mail is an intriguing idea with tremendous potential, and [e-mail] is a very large and steadily growing market," said Adam Schoenfeld, VP of Jupiter Communications. The New York-based consultancy just released a study concluding that 28% of 60,000 Internet users surveyed online chose e-mail as their primary online activity. Further, according to Boston-based consultancy the Yankee Group, there are 22 million U.S. households that own PCs with modems, but only 9 million actually use the modems.

"Cornering this market will boil down to who can establish the best relationships with advertisers and who can get the product into the hands of consumers most quickly," said Mr. Schoenfeld.

Not to be overlooked, Juno is working on distribution deals with a handful of hardware and software manufacturers to bundle its disks at retail. advertisers-none of which are signed-will also be able to target users. But instead of sponsoring individual pieces of mail, advertisers' messages will flash every thirty seconds across the top of the screen.

"We don't think consumers will like such tight linking of individual ads displayed with each piece of mail," said Charles Ardai, president of Juno Online, which will soon launch a multimillion-dollar direct marketing and advertising campaign from Jordan McGrath Case & Taylor, New York, and possibly other agencies.

"Consumers love anything that's free, and will put up with advertisers for free e-mail," said Greg Wester, associate director at the Yankee Group. "Most online services are offering the equivalent of a BMW in the car market, and many consumers can't afford that or don't want to pay for it."

Freemark is also concentrating on attracting content providers to supply customized information to its users. The e-mail marketer has already signed a contract with ESPN's Sports Ticker for delivering free sports information to users who express interest. Freemark foresees similar alliances with content providers offering recipes or daily horoscopes or news and is also contemplating building a Web browser into the next version of its service.

"A problem I see for free e-mail providers is what if America Online or Microsoft start offering free e-mail," said Jupiter's Mr. Schoenfeld. "Simplicity is the key to e-mail. The more e-mail services become like regular online services, the more they have to compete with them."

Freemark's service initially will be delivered over the CompuServe Network, a service provider for network connections to the Internet that is a division of CompuServe, whereas Juno is talking with the big three long-distance providers-AT&T, MCI and Sprint.

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