Free Net Access Gets Costly

The future may offer a mixed blessing: You'll have free Internet access, but you'll pay for it by viewing ads. And the ads are getting smarter.

Custom advertising, targeted at your interests, will populate the banners that you may put up with to get free Internet access, according to a recent study released by Strategis Group.

More than 12 million users already go online using a free, advertising-supported service, according to Strategis Group researchers. They expect that number will grow to 37 million by 2005, climbing to about 23 percent of all residential Internet users.

Ever-cheaper bandwidth and increasingly sophisticated tools to personalize content delivery are pairing to make free Internet access more profitable, say the researchers.

Expect Partners for Free Service

Free Internet service providers have attracted attention and investors, but they need to draw more customers to survive, says Ty Cottrill, senior analyst and author of the study "Residential Internet Access: The Free ISP Model."

"Free ISPs now must focus their efforts on demonstrating that the millions of subscribers they serve can be translated into a profitable, long-term business," Cottrill says.

He envisions several basic service options. Some ISPs will offer free service on their own, supported by advertising (that will be increasingly personalized). Other ISPs will partner with established Internet services, such as portals or sites, to offer free access. And others may pair with a brick-and-mortar company, which may offer free Internet access as a way to break into online business. For example, Kmart has paired with Yahooto offer free Internet access to some customers.

"Such companies as financial institutions, automobile manufacturers, and fast-food restaurants are likely candidates to offer such services to customers and employees," Cottrill says. He says organizations such as alumni groups and political parties may also build on the free ISP model.

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