Free ISPs Looking for Online Sales, Customers

SAN MATEO (04/03/2000) - WITH LESS THAN 50 percent of American homes connected to the Internet, a new e-commerce strategy is emerging among traditional brick-and-mortar companies to get millions of brand-loyal customers online.

Kmart, NBC, Ford Motor, Delta Air Lines, and others are becoming virtual ISPs offering free Internet access.

The benefits for companies include everything from the obvious increase in sales to companies who offer PCs and an Internet connection, to employees finding that support costs at the office are declining.

"The people who use computers and the Internet at home become more proficient at work. That was one underlying premise that drove the value status at Ford and Delta," said Rob Enderle, a senior analyst at Giga Information Group, in San Jose, Calif.

This week, NaviPath, a wholly owned subsidiary of CMGI, will launch a host of wholesale Internet access services for rebranding by corporations, organizations, and affinity groups.

"There is a significant transition going on as large mass-market companies -- everything from appliance and clothing manufacturers to computer companies and large financial institutions -- will be offering free service," said Brendan Howe, vice president of marketing at NaviPath.

As a new set of providers emerge, including the Republican Party at GOP.net, AAA, NBC-I, the AFL-CIO, Delta Air Lines, and Ford, one analyst said it ultimately would affect traditional ISPs.

"AOL [America Online] and the others have a problem with members who have a strong identification with an affinity group," said Steven Harris, an analyst at IDC in New York.

After lackluster success with its original e-commerce site, Kmart launched its free Internet service, Bluelight.com, in December. In 14 weeks, more than 1 million customers signed up -- 400,000 of them first-time users.

"We surveyed our customers and discovered that 53 percent weren't online. We offered free Internet service as a way to get them to our e-commerce site," according to Dave Karraker, a communications director at Bluelight.com.

The number of first-timers is as significant as the total number of subscribers.

"A new Internet user is much more likely to stay with that ISP, especially with free ISPs," Harris said.

If it is a numbers game, then brick-and-mortar companies bring to any e-commerce marketing effort extremely large digits. Kmart can promote its ISP service to 32 million weekly visitors to its stores and via the 72 million flyers it sends out per week, Karraker said.

The unlimited no-charge service will hit 3 million subscribers by the holidays, Karraker said, making it the nation's fourth-largest ISP.

SpinWay provides Internet access to Kmart, while Yahoo provides the co-branded content, e-mail, calendar, and Web hosting for customers who create their own Web pages.

According to Karraker, companies with their own ISP service can also begin to branch out and offer products and services not available in their stores.

Kmart, for example, will soon sell large screen televisions or pharmaceuticals.

"Now we have a built-in, captive audience," Karraker said.

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