Juno

[Steve]

x-no-archive: yes



For Some, Free E-Mail Arrives Just Once a Day

Matt Richtel
NY Times 2/3/99


Juno Online Services, a New York company that pioneered the concept
of free e-mail, has lately upset some of its subscribers by
mimicking a key aspect of old-fashioned snail mail. Namely, for
thousands of Juno users, e-mail now only comes once a day. 

Charles Ardai, president of the company, said that because of the
high cost of telecommunications in some regions of the country, Juno
users in those areas will be permitted to sign on only once a day to
obtain e-mail. If users want to check their e-mail more often, they
will have to pay $2.95 per month for the premium service. 

The restriction went into effect Jan. 22. 

Ardai said the change impacts less than 1 percent of Juno's 6.5
million subscribers. At the same time, Ardai did not rule out the
possibility of expanding the limitation nationwide. 

"I have no opinion on that," Ardai said flatly, when asked if he
might expand the scope of the policy in the future. 

Ardai went on to equivocate about the future of
advertising-supported free e-mail, which is a key part of Juno's
business model. The service, which was founded in 1995, subsidizes
free e-mail access by including banner ads above each message a Juno
subscriber sends out or receives. 

Ardai did not say whether he is losing faith in the business model
he helped pioneer, but the company has over the last year begun
emphasizing other sources of revenue, including selling Internet
access for $19.95 a month. 

The company has good reason to modify its strategy, according to
industry analysts, who say the free e-mail model presents serious
challenges. The concept behind free e-mail, as well as free Internet
access, is that a company hopes to amass enough subscribers so that
it can in turn attract an advertising base to market to those
subscribers. Thus the advertising revenue subsidizes the service. 

Unlike some other companies that offer free e-mail, such as Hotmail,
Netscape Communications Corp. and Yahoo, Juno offers free e-mail
accounts without the need to subscribe to an Internet service
provider, or to otherwise have Internet access. Juno subscribers
install proprietary software on their computer, then dial in to one
of roughly 1,400 local phone numbers to download and read e-mail.
This so-called dial-up e-mail service does not include access to
other Internet features, such as the World Wide Web or chat. 

In general, Juno's business model is analogous to that of network
television, in which programming is free, but is interspersed with
commercials. 

However, that strategy has sunk a handful of companies in recent
years, including both e-mail providers and free ISPs. One-time Juno
competitor Freemark Communications Inc., launched a dial-up e-mail
service in 1996 and folded shortly thereafter. Among the free ISPs
that have struggled or folded are Bigger.net of San Jose, which
declared bankruptcy last year, and Tritium Services of Cincinnati,
which "temporarily suspended operations" in October of 1998. The
company could not be reached for comment on its current status. 

The reason for the failures, generally, is that the companies spent
millions of dollars on marketing and technology while unsuccessfully
seeking to amass enough subscribers to attract an advertising base. 

Recognizing the limitations of ad-supported service, Juno in July,
1998 began offering "premium services." For $2.95 a month,
subscribers can use their e-mail account to send and receive files
that are not text-only, like graphics or video. For $19.95,
subscribers receive full Internet access, including access to the
Web. Ardai said the company has attracted "more than 100,000"
subscribers to its Internet access business, which is a healthy
number for a mid-size ISP. 

The change in tactics comes as numerous other entities offer free
e-mail accounts, including many portals and most major search
engines. Hotmail, a free e-mail provider owned by Microsoft Corp.,
claims to have 30 million subscribers. 

Ardai declined to specify how many users will only be able to access
e-mail once a day. He also declined to disclose which areas of the
country are impacted. 

Some subscribers affected by the new limitation expressed
frustration at the change. One subscriber, Wayne Perry, a 62-year-old
retired Sears employee who lives in a small town east of Raleigh,
North Carolina, said he subscribed to Juno more than a year ago and
had come to rely on it for business and personal matters. 

"They're limiting connections to one a day. That's useless for
e-mail service," said Perry, who said he is accustomed to checking
messages as many as a dozen times a day. "This is hard for anybody to
comprehend." 

Perry said he could afford to pay $2.95 a month for premium service,
but he resented the "principle" of being among several thousand
members "singled out" by Juno. "If they said it was all members,
that would have been O.K.," he said. 

In a somewhat unusual community appeal, Ardai in his e-mail message
to subscribers informing them of the change encouraged those who can
afford it to pay $2.95 a month to help subsidize users who cannot. 

"We'd like you to consider signing up for it if you can afford to do
so, thus helping cover the cost of providing free e-mail to those
who could not otherwise afford it," he wrote. He added that
subscribers who agree to pay will help provide service to those who
cannot afford the fee. "You will be helping us to move closer to this
important goal" of providing "free e-mail services to all Americans,"
he wrote. 

Peggy O'Neill, an Internet industry analyst for Dataquest, a market
research company in San Jose, said Ardai might be doing himself
something of a disservice as president of the company, which itself
is seeking a different goal: to become profitable. O'Neill said in
particular that potential investors and subscribers should be
concerned about Ardai's stated ambivalence about the future of the
advertising-supported business model. 

O'Neill also said that Juno is entering "unchartered" territory by
offering e-mail access for $2.95 a month, which she deemed a
"hybrid" model. "I don't think it's going to work," she said. 

Also expressing skepticism is Drew Ianni, online advertising analyst
for Jupiter Communications, a market research firm. He said that
Juno will likely engender hostility from members who expect free
e-mail access but can only check their account once a day. 

Over the long run, however, Ianni is optimistic about the potential
for advertising-supported e-mail and Internet access because he
thinks Internet-based advertising will grow "exponentially." At the
same time, he said, there may not be sufficient advertising revenue
over the next three to four years to make such operations
profitable.

"I'm optimistic with a caveat," Ianni said. "Companies will still
have to survive over the next two to three years...and it's a tough
road to hoe." 

Copyright 1999 The New York Times Company





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