NETZERO OR NOTHING; ISP BANKING ON BIG CONCEPT: NO CHARGE.

Byline: Ben Sullivan Daily News Staff Writer

Internet service provider NetZero is boldly going where plenty of others have gone - and failed - before.

The 25-employee company hopes to stick it to the likes of America Online and Pasadena-based EarthLink Network by providing members free, all-you-can-eat Internet access.

The hitch is that users must provide the company with oodles of personal data when they sign up, and access to a running list of Web sites visited while online. NetZero uses the data to direct advertising toward the member's screen, with ads appearing in a small, ever-present window that overlaps the browser.

If the concept sounds familiar, it is. Dozens of similar firms have sprung up around the country in recent years, but most have remained loss leaders for larger Web-based firms or gone bust due to a lack of members and advertising.

San Jose-based Bigger.net, one of the earliest and highest profile of the free providers, was the most recent victim, declaring bankruptcy in October. In exchange for a one-time $60 fee, the company's 18,000 members were promised unlimited lifetime access to the Internet. Instead they face an uncertain future as the firm struggles under new ownership.

An additional 100,000 or so registered users of the free Tritium Network were told in October that their access was being temporarily suspended as the company looked for fresh investors.

NetZero's founder and Chief Executive Ronald Burr bristles at comparisons to such failures and insists his company is going to make money. Burr's secret weapon: Deep-pocketed investors willing to keep the firm flush while it builds a sufficiently large membership base.

``We're absolutely going to spend millions,'' Burr said, adding the company is backed by the venture capital wing of the Pasadena-based Idealab. ``You've got to make an investment to get your user base up to the critical mass.''

For NetZero, the magic number is 1 million. With a million users, Burr figures the Westlake Village-based company will attract enough advertisers to pay for all the staff, marketing, network access and tangential costs of running an Internet service provider. Anything more is gravy.

This weekend the company expects to pass the 50,000-member mark, an impressive accomplishment considering NetZero has only been running since Oct. 19 and has yet to roll out its national advertising and recruiting campaign.

``We're signing up about 1,800 users a day, mostly through word of mouth, and it's growing virally,'' Burr said. ``Newsgroups (about the service) have started all by themselves.''

Still, the firm has a long way to go before reaching its break-even membership target - expected in the first half of 2000 - and further still to attract sufficient advertising. So far, 16 companies have agreed to advertise through the ISP, though Burr acknowledged in most cases NetZero has given the firms discounts for their business. (The ISP's rate card is based on a combination of the number of groups targeted and impressions received for a particular ad.)

Whether NetZero or any free ISP can survive over the long run is fodder for debate in the e-commerce community.

``I'm rooting for them, but I don't know if they'll make it,'' said Jay Schwedelson, vice president at Boca Raton, Fla.-based Webconnect, a media placement firm that sells about $35 million worth of online ads a year. Even if NetZero can attract thousands of members, Schwedelson said, they may not be the sort of users that advertisers want.

``E-commerce advertisers are looking for people who want to spend dollars. If it's a free service and someone's using it, they're very likely to be a person who doesn't like to spend money when they don't have to,'' Schwedelson said.

Not surprisingly, established, fee-based ISPs say theirs is the more likely model for financial success. ``We've looked at (free service) several times, because we can see what the mentality is behind it,'' said Bill Heys, senior vice president at EarthLink. ``But you can only throw so much advertising at subscribers or members before they get irritated.''

Heys and others say most Internet users appreciate the privacy, if not the anonymity, that the medium affords. An ISP actively tracking where a person spends his time online, and then essentially selling that information to advertisers, may be too much for some surfers. ``We think you're stepping over a privacy line at that point,'' Heys said.

Dave Zinman, founder and director of product placement at Palo Alto-based AdKnowledge, said that as long as there are multimillion-member, fee-based ISPs like America Online available for advertisers, any free ISP is at a disadvantage. ``Either everybody shifts to this model or the model can't be successful,'' said Zinamn, whose firm creates tools for Internet marketers to manage their web advertising.

Burr remains undaunted. And working to his advantage is the buzz his company has generated online and in e-commerce circles.

``We do see ourselves changing the ISP industry,'' he said. ``We don't see the subscriber model going away, but we're going to fundamentally change the way Internet access is delivered to a large percentage of the population.''

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Photo

PHOTO (Color) Ronald Burr, founder of Westlake Village-based NetZero, bets he can attract 1 million users to his Internet service by mid-2000.

Tina Gerson/Daily News