SAN FRANCISCO (07/06/2000) - While Web businesses are failing left and right, the free Internet access model has, contrary to many predictions, managed to survive - and even to thrive in a few cases - until now. WorldSpy, one of the most interesting upstart ISPs to offer free access, has shut off its services.
In its first incarnation last year, WorldSpy was an e-commerce site that, despite tenancy on America Online Inc. and Lycos Inc., failed to build a brand name or sales volume. So in a bid to boost the company fortunes, CEO Alan Clingman decided to offer free Net access to anyone who signed up at the WorldSpy portal.
Unlike other free ISPs, WorldSpy did not force users to put up with intrusive advertisements. Instead, its catch was that the start page for the Net service was WorldSpy's e-commerce site. Clingman hoped that this would build a base of loyal users who would peruse the WorldSpy. Clingman, also the head of the incubator firm iCentennial Ventures, then set up another company, MicroPortal, to handle the free Internet access for WorldSpy. Now both companies are apparently dead.
No one at WorldSpy or iCentennial returned calls at press time, but according to WorldSpy's site and that of rival Juno, all of WorldSpy's subscribers have had their service suspended; however, they have the option to join Juno's service.
In September, Clingman told The Standard that giving away Net access could be the ultimate ploy to build his brand and - by controlling the start page - to get people to come back to his e-commerce site.
"To build a brand, the cost is going up, not coming down. Especially when every other ad on TV or the radio is already dot-com this or dot-com that," he said at the time.
Clingman tallied 6,000 subscribers in the first three days of WorldSpy's operation, and he thought the company could reach 1 million. But in the end, WorldSpy managed to garner only 260,000 subscribers, according to Juno.
"I talked to Clingman once before, back when he was getting started," said Juno CEO Charles Ardai. "From a subscriber acquisition standpoint, I thought it was a great way to get lots of users. But I wasn't so confident that he's got enough e-commerce revenue just for starting his users on that [WorldSpy] start page."
Ardai's reticence seems well-founded because Juno is now busy acquiring WorldSpy subscribers.
But the undoing of WorldSpy doesn't mean the death of a business model. It might just be the first major sign of consolidation in the free-ISP space.
WorldSpy's 260,000 subscribers weren't enough to keep it afloat, and others with similar subscriber bases might soon be forced to give up the game to a few competitors, such as NetZero, Spinway (through Kmart and Yahoo) and 1stUp, that already have millions of subscribers.
Unlike WorldSpy, which counted on e-commerce for its revenue, Juno and a few other ISPs are going strong. Juno offers both free and paid Internet access, and it supports itself through a mix of subscription fees, e-commerce dollars and advertising. Ardai said the company had US$129 million in the bank at latest count.
Juno will give stock to WorldSpy for each WorldSpy subscriber that signs up for Juno's service. WorldSpy subscribers have been offered the incentive of being able to keep their WorldSpy e-mail address active if they make the switch. It's too early to know, though, just how many people will make the switch, and Ardai won't say how much Juno stock WorldSpy will earn for each user.