Woodland Hills-based United Online Inc. is looking to reinvigorate its NetZero brand, bringing it into the 21st Century. United Online last month launched NetZero’s new 4G mobile broadband service, complete with a free option. The debut promised to “revolutionize Internet access.” “We are the people who brought the mass market Internet access, and we want to be the people who bring the mass market mobile broadband,” United Online CEO Mark Goldston said. NetZero plans to undercut competitors such as Verizon Wireless by offering a less costly version of mobile broadband — the same goal its ad-supported, free dial-up service had when it launched in 1998. Recently, Goldston said NetZero was operated as a “cash cow” that could direct earnings into other company operations. Now that’s changing. “We think (our broadband service) can be a major growth engine,” he said. Users can access NetZero’s mobile broadband for up to one year for free and data plans start at $9.95 per month. The free version comes with a very limited data allotment, making it difficult to watch streaming video. It will serve as a hook to gain paid subscribers, a service that promises to be less expensive than that of other competitors, Goldston said. NetZero 4G isn’t marketed toward users that have become known as “data hogs”, Goldston said. United is targeting individuals that want the Internet on the go and either can’t access public WiFi, or have concerns with the service. “This is not designed to be home Internet replacement,” he said. To access the free and paid services, users must purchase a NetZero 4G HotSpot for $100 or a NetZero 4G Stick for $50. The service, the company says, is available in more than 80 cities through Clearwire Corp.’s network. The potential for success is there, but the proof will hinge on how many subscribers the service receives compared with United’s investment, said analyst Mike Crawford of Los Angeles-based B. Riley & Co., which makes a market in the securities of United and has provided the firm with non-investment banking securities-related services in the last year. “They are coming out with a fairly aggressive advertising campaign that will not come cheap,” Crawford said. Still, the bet is a relatively low-risk one because United is piggy-backing on Clearwire’s network, he said. United Online has several different online businesses. Its communications segment —which includes NetZero and the Juno brand — accounted for 14 percent of consolidated revenues last year, down from 18 percent in 2010. United’s revenue comes chiefly from its online flower delivery business, which accounted for 65 percent of consolidated revenues last year and $78.6 million in operating income. But the communications segment is a money maker, inking $61 million in operating income, despite the segment accounting for a small share of revenues. Still, revenue and profit are declining and subscribers have shifted mostly to rural areas where broadband is difficult to access. Revenues for the segment declined $40.6 million to $126.5 million, mostly due to a drop-off in the number of dial-up pay accounts, which the company predicts will decline further. Overall last year, United inked $51.7 million in profit, down 3.6 percent from 2010, on revenues of $897.6 million, down 2.4 percent from a year earlier. Crawford said United is “uniquely positioned to mine and harvest these almost hidden assets” such as its online flower delivery service and Classmates.com, which helps former classmates reconnect, to drive subscribers to the new 4G service. He said United is undervalued in part because investors view the firm’s online services as coming from another generation. “(NetZero 4G) could be a sea change in how people see the company,” Crawford said.
United Online Launches 4G Mobile Broadband Service
