Inc Juno Online Services - A Business Model Challenged

A BUSINESS MODEL CHALLENGED

Under mounting pressure from shareholders to produce profits, Juno began experimenting with ways to convince users to switch to fee-based services. According to a March 2001 article in BusinessWeek Online, the firm began making it more difficult for its most frequent users to log on to the free service. "The misconnects were no technical glitch. Juno was deliberately curbing heavy hitters' access to prod them into switching to its $14.95-a-month plan. The reason: A survey of its subscriber base revealed that a mere 5 percent of users of its free service accounted for most than half of Juno's online costs." Also forcing Juno to reexamine its free ISP model was the fact that the North American economic downturn in 2000 and 2001 prompted many firms, dot.com and otherwise, to tighten their online advertising budgets. With its main source of revenue drying up, Juno needed to find other sources of income.

By mid-2001, several of Juno's free ISP rivals had declared bankruptcy, and many analysts began to call into question the viability of the free ISP model. In June, Juno and NetZero announced their intent to merge; the deal was completed three months later. The newly merged firm, named United Online, was the second largest Internet access provider in the U.S. As stated by Forbes.com writer David Simons, "The haunting question is whether the merger creates a viable long-term business or just delays a fate already suffered by free Internet service providers around the world."