Free Internet access with purchase
July 7, 1999
by Bernhard Warner
(IDG) -- Could the British, with their appetite for free ISPs, teach the rest of the world a trick or two about e-commerce? The blokes at Zoom, a free ISP from the U.K. retailing giant Arcadia Group, think so.
Launched this month in the U.K., Zoom combines e-commerce and free Internet access. Well, almost free. British telephone companies still charge users, regardless of the ISP, by the minute, as they do for all local calls.
Zoom is hardly the first company to provide no-fee access. In fact, the U.K. has become the land of the free ISP. With Zoom's launch, three major retailers have jumped into the fray, including Dixons, the country's largest electronics and appliance chain. Dixons' Freeserve service has become the U.K.'s leading ISP, with twice as many subscribers as AOL Europe. And Freeserve has filed to sell stock to U.S. investors.
With Zoom, consumers have no obligation to buy products from Zoom or its 17 online retailing partners. But Zoom is betting the typical U.K. online shopper eventually will buy something from one of its partners, which include Amazon, Ticketmaster, music retailer HMV and auction site QXL.
Eva Pascoe, managing director of Zoom, says Arcadia wants to encourage its 15 million Arcadia store credit-card holders to shop online. Arcadia can communicate more cheaply with customers via e-mail and targeted online advertising than via direct mail, so it is using Zoom to collect e-mail addresses and shopping data. The reduction in direct-marketing costs should more than offset the Internet access costs, Pascoe explains.
"If you can save 20 percent to 30 percent a month on mailings, you're talking massive numbers," Pascoe says, adding that the venture should be profitable when it hits 200,000 customers.
Pascoe notes that, thanks to the regulatory structure of the U.K.'s telephone system, Zoom makes money even on users who just window-shop. The phone company pays Arcadia a percentage of revenue for calls generated by Zoom users. Meanwhile, Zoom is flush with advertising messages. And when consumers purchase on Zoom, the company collects a commission.
In July, Zoom plans to launch both a Zoom-branded online credit card and a loyalty program that gives shoppers points for more free stuff.
Pascoe believes the Zoom model can work in the U.S. Zoom's newest American counterparts are companies like DirectWeb and Gobi, which give away a PC and cheap Internet access, but have yet to figure out e-commerce models. While the U.K. has economic factors in its favor, she says the most important factor is brand loyalty. Sounding eerily like Amazon's Jeff Bezos, Pascoe says, "Nobody should know more about you than your favorite retailer."
"Internet access," says Pascoe, "is not about pipes and telephone line. That's the mistake they make in the States."
GOD SAVE THE FREE SCREEN
Three major retail chains in the U.K. have entered the free-ISP market. Based on either advertising, e-commerce or kickback fees from phone companies, these businesses are redefining the access business.
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