Free Internet Access Leveraged

SAN MATEO (07/10/2000) - The coming post-PC era is finding major brick-and-mortar consumer outlets using their giant customer base to create and own new Internet e-commerce channels.

Yahoo Inc., based in Santa Clara, Calif., announced Monday that it will offer as an optional service to its 3,600 marketing partners the ability to offer their customers free Internet access. The access will be supplied and managed by Sunnyvale, Calif., Spinway Inc., the company that already supplies free access for K-Mart's 2 million-plus Internet subscribers.

Yahoo's 3,600 partners include some of the top brands in the world such as Ford Motor Co., PepsiCo Inc., Spiegel Catalog, and Victoria's Secret.

Although penetration of home PCs in the United States has stagnated at about 50 percent for years, the expectation of increased Internet access via TV set-top boxes as well as mobile access over phones and PDAs (personal digital assistants) has consumer giants targeting the rest of America, according to Lydia Leong, a principal analyst at Gartner Group Inc.'s DataQuest Inc., in San Jose, Calif.

The largest consumer companies are not looking to cannibalize current Internet subscribers but instead are reaching out to their established customer bases, with numbers in the tens of millions, through CDs in their stores and through their catalogs. The intention is to get their customers who are not yet online to sign up for a free ISP service.

K-Mart is signing up subscribers to its Web site, BlueLight, at the rate of about 120,000 per week through its free ISP offering, while free ISP provider Spinway along with its business partners is signing on about 30,000 subscribers per day to its co-branded ISP service, according to Danny Robinson, founder and CEO of Spinway.

Although Spinway officials would not comment, rumors abound that Toys R Us, one of the top five retailers in the country, will also offer a free ISP service through Spinway.

SpinWay officials claim that its service is already eating into paid subscription services such as AOL, and DataQuest's Leong agrees.

"SpinWay is after the same audience as AOL, the 'average' American consumer.

And if you are an AOL subscriber you are a target of ads already, so you don't care about ads if the service is free," Leong said.

However, Leong added that AOL, since the acquisition of Time Warner Inc., is now a media conglomerate and over time will presumably offer special "value add" to its subscribers.

"Right now SpinWay is a small annoyance to AOL, but eventually they will take notice," Leong said.

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