Nothing But Net (And Ads)

Today in Tedium: People want an improbable deal, no matter how unlikely that deal might actually be. Hence the strong interest in MoviePass, a company with a model so doomed that people were suggesting it would initially fail not long after it started offering free daily tickets at $9.99 per month. (Instead, its fast decline took about a year, even with a high burn rate, and now the company is changing its model because it has no other choice.) The fast decline of MoviePass got me thinking of another concept with a similar arc, one that hinged on a similar bet: The numbers would eventually work themselves out. I’m, of course, talking about ad-supported dial-up internet. Today’s Tedium ties a thread between MoviePass, Juno, and NetZero. — Ernie @ Tedium

Raise your hand if this device helped shape your childhood. (Lawrence Sinclair/Flickr)

The early days of the post-AOL internet were defined by schemes to offer internet at a deep discount

What are you willing to tolerate in exchange for something you get for “free”?

How far will you defile both yourself and your computer in an effort to access something that other schmucks happily pay for?

The Free-Net model, which I wrote about earlier this year, pitched the idea of community supported internet, but it definitely wasn’t a commercial model. For one thing, most Free-Nets could only support text-driven interfaces!

So this meant that entrepreneurs were looking to find different paths to monetize internet service in some way, shape or form. In one case, there was a company that tried to franchise out dial-up internet service like it was McDonald’s or Burger King.

But there were lots of companies that saw an opportunity in free or extremely cheap internet beyond Juno and NetZero.

One such service, Bigger.net, offered a model reminiscent of MoviePass: Pay a one-time $59 fee, get free internet forever, no questions asked, though definitely with some advertising. CEO Jeff Fortin was bullish, because of course he was.

“Consumers will finally realize internet access is not something that has to cost $300 a year,” he stated in a 1997 interview. “Other access providers are going to have to look at ing themselves with a similar program.”

By January of 1998, there were already cracks showing in the model, with the company having to suspend new accounts on its website. By November of that year, the competing Brigadoon.com, which distributed internet access to nonprofits, bought Bigger.net for a not-so-big price of $275,000. (Spoiler: Brigadoon.com is dead, too, and leads to a fake Adobe Flash site if you load the URL.) Cincinnati’s Tritium Network, which launched in 11 cities early in 1998 and relied on a CNN Headline News-style ticker tape at the bottom of the browser screen (as well as network backbone from Ohio’s own CompuServe), had shut down operations by November of that year.

The year before that, a company called j3 Communications tried to bundle unlimited access with long distance service. Key word: Tried, because the service lasted less than a month.

These experiments failed for numerous reasons, including execution challenges and the sheer cost of offering a service that competing companies were getting paid a lot of money to offer. Dial-up internet access was not a commodity at this point, no matter how many attempts these companies made to make it so.

But eventually, two companies got the model right enough that they became famous for offering free internet …supported, of course, by persistent, somewhat annoying ads.

Juno only did email when it first started. (Grilled Cheese/Flickr)

Why Juno and NetZero stood out when their competitors did not

Pulling off an idea as audacious as free ad-supported internet was not going to be an easy trick in 1996. Framing it in 2018 terms, these companies had to do a lot of difficult things all at once: They had to build their own proprietary technology, create a national network of phone banks to handle internet access, rely on word of mouth and traditional marketing (the real-world kind, because the people they were reaching weren’t online yet), and distribute a whole lot of physical discs.

It’s the Pets.com problem, multiplied: They had to operate like a brick-and-mortar business with an untested business model, starting from zero infrastructure, while their main competitors (AOL and CompuServe) had business models that actually worked.

But since there were so many companies trying to make this model work, it makes sense that a couple stood out. Towering among them were Juno and NetZero.

Juno got to the free-internet model earlier than nearly all its competitors, launching August of 1996 with a dial-up application that split the difference between AOL and the languishing Free-Net model; all you needed to get online was a modem (a soft modem did the trick), but you got a Windows-based graphical interface. Of course, free came with a cost, and that cost was ads.

However, Juno’s original idea of “online” was limited to email. If you wanted to send a message to your pals with Juno, you could. But surfing the web was beyond its capabilities at first.

It wasn’t a particularly robust form of email, either. There were distinct limits on how much data you could send and receive in a message—the limit was a mere 35k. (For comparison’s sake, the GIF at the top of this message, compressed to hell on purpose, is about 170k.)

Juno, which was backed by a massive investment firm, wasn’t first to this idea of free email—while it demoed the service to The New York Times in April of 1996, Hotmail beat them to the market by a month—but Juno’s approach was different, relying on a dedicated app rather than Hotmail’s web-based interface. Hotmail instantly became the more popular service for two reasons—one, its model (which didn’t have to rely on physical distribution and targeted existing internet users) was better-suited for viral success, and two, Microsoft bought it after just a year and a half of existence, ensuring its model of web-based free email would be built to last.

An early commercial for NetZero.

NetZero, meanwhile, came about two years later when the internet had become more common nationwide, and took a more aggressive approach than Juno. (It had also taken some lessons from the free ISPs that failed to build the model they succeeded with.)

Impress your friends. Click here.

Every 15 to 30 seconds, the company’s proprietary software would put a new ad on the screen, highlighting a different advertiser. The ads, which were persistent but not overbearing, were one thing (a San Jose Mercury News reviewer noted that the flicker level on the ads was strong), but the real reason why NetZero’s model was problematic came down to its use of data.

Years before Facebook was criticized for doing the same thing, it relied on aggressive data-suction techniques that were still very new for online access, including geographic targeting and website tracking.

In an interview with the Los Angeles Times, cofounder Ronald Burr characterized the move as one that benefited both the consumer and advertiser.

“It’s a win-win,” Burr said. “The ad that comes to you is meaningful to you, and the advertiser is getting ads to the people who are more likely to be interested in the product.”

Ultimately, the concerns about data privacy didn’t hurt NetZero; the service, which also offered pay versions, was successful enough that it had 3 million users clogging its dial-up lines by the middle of 2000, and it was getting large investments from companies like Qualcomm around that time.

Juno, which replicated NetZero’s service around that time, was no slouch either; nearly 3 million users had Juno.com email accounts by the end of 1999.

The services, however, had a fatal flaw in their original form: The ad model.

(via Internet Archive)

Both Juno and NetZero assumed that online advertising was going to be a lot more valuable than it actually was

You know how, when you join a social network for the first time, you’re encouraged to fill out your profile? Facebook offers a great example of this, of course—all those data points about where you grew up, your school, your job, and so on aren’t just there to share with your friends.

The dirty not-so-secret of the modern internet: Facebook, LinkedIn, and other social networks use your vitals to build a profile of you for advertisers.

Services like Juno and NetZero did something like that in the late ’90s, too, but they weren’t so subtle about it—they wanted you to know everything about you so they could advertise against you. It wasn’t subtle—you were required to share your vital information in exchange for the right to use their services. They literally straight-up asked, no hiding the nefarity of their purposes.

In fact, NetZero asked users 30 questions out of the gate, according to the Los Angeles Times. Thirty! You might have been expecting free internet, but you weren’t getting that ad-sponsored dial-up without a pop quiz.

But perhaps the most out-of-whack expectation about these services, and the thing that makes them so similar to MoviePass, might have been what they expected to make off all these customers that were getting online by paying for their data. As online advertising was brand new at the time, the model was completely out of whack with the expectations a modern advertiser might have in 2018.

These days, the average banner ad makes a few cents off of a certain number of views, more if users clock, but generally if you’re trying to make a lot of money through advertising, you want something captive, like a video or a podcast. Those are where the high CPMs—essentially, the cost of having your ad seen by a thousand people—are. (You’re reading this in a newsletter, so I look longingly from the other side.)

Both Juno and NetZero assumed that, because people were required to see their ads to use their respective services that they could charge a lot more for those ads. They had nothing to compare the model to, because online advertising was brand-new, but the rates, out of context, sound absurd.

According to the New York Times, Juno assumed before its launch that it could charge advertisers prices of $50 to $70 per 1,000 viewers who were simply looking at email. And per the L.A. Times, NetZero was hoping to sell ads at a CPM of $25 to $65. These rates were comparable to national magazines—and would be unheard-of today for banner ads.

Even though Juno and NetZero likely knew more about their audiences than a Conde Nast publication, the model just wasn’t there like they hoped. They banked on the idea that the banner ad, even as a persistent part of a screen, would be something that lots of people would want to click on. And it turns out people weren’t interested. It was common in 2000 to run across folks on forums that were trying to remove the NetZero banner by any means possible.

To be fair to Juno and NetZero and everyone else that jumped on this model, people were making bad bets on advertising left and right in the late ’90s. For example, as I wrote in my piece about online food delivery last year, a company called Cybermeals spent $54 million on untargeted advertising on four different portals over a four-year period, an absurd amount of money considering that most of the people those ads were hitting could not actually use the service!

The era was littered with stories like that. So it was inevitable that when the online advertising market stumbled, creating a crash in the tech sector, the free internet model would look a lot less appealing.