By JESSICA E. VASCELLARO and EMILY STEEL
Wall Street Journal
EarthLink, NetZero Offer Low-Cost Deals, Tout Savings
Dial-up Internet access was supposed to be dead by now, replaced by Wi-Fi, DSL and other high-speed services.
But dial-up is proving to be more resilient than expected, at least partly due to the recession, which has helped to prolong, or in some cases rekindle, demand for a slower but cheaper way to surf the Web.
Indeed, two of the nation's biggest providers of dial-up service, EarthLink and NetZero, are ratcheting up their marketing and promotional efforts to take advantage of consumers who are trading down from broadband or -- more likely -- delaying their switch to it.
NetZero Chairman and CEO Mark Goldston appears in a new ad for the Internet service provider that touts the cost savings of using dial-up. Video courtesy of NetZero.
In their marketing, both NetZero and EarthLink home in on the money consumers can save by downgrading their Internet service from higher-priced plans.
EarthLink's offer, made through its PeoplePC subsidiary, also aims to attract unemployed consumers who, even if they're cutting household spending, need Internet access to check email and job listings. "Clearly the economic situation today is tough for a lot of people," says Kevin Brand, EarthLink's senior vice president of product management. "If you're looking for a job, the Internet is your best resource for that, and we wanted to do something to help."
NetZero says in its commercials that its $9.95-a-month service can save households $300 a year. "It's a bigger consumer stimulus package than virtually anything that has come out of Washington," says Mark Goldston, United Online's chief executive.
Broadband service tends to be at least triple the price of dial-up. A July study by the Pew Internet and American Life Project found that the average U.S. broadband bill is $34.50 a month.
Mr. Goldston, who writes most of NetZero's ads, said the idea for the new message came to him while he was listening to Congress question auto executives late last year. He began scribbling down figures -- the average cost of broadband service, the number of U.S. households -- and incorporated them into a numbers-focused ad.
"I am absolutely not telling anyone that broadband isn't a terrific medium," Mr. Goldston says. "All I'm saying is, times are tough. And if you're looking to save money, we're an option where you don't have to cut out -- you can cut back."
During EarthLink's Feb. 5 earnings conference call with analysts, CEO Rolla Huff went as far as to compliment his competitor's campaign. "I think their message is right on the money, and I hope they keep it out there. I'm loving it," he said. Mr. Brand added that the campaign is raising awareness for the dial-up market in general.
That market for dial-up, sometimes called "narrowband," is still in decline. EarthLink's consumer dial-up division lost 173,000 subscribers in the fourth quarter, while NetZero shed 86,000. They ended the year with 1.76 million and 1.74 million dial-up subscribers, respectively.
But their results also indicate that as households have cut their spending, some have reverted to dial-up from faster connections or delayed an upgrade. Mr. Brand said EarthLink began seeing an unexpected uptick in gross subscriber additions in December, and customer turnover at both providers fell.
"It's a smart move, in my opinion, for them to focus on the value message," says Doug Williams, an analyst at Forrester Research.
He is skeptical, however, that dial-up services will attract many broadband users, pointing to a survey of U.S. consumers in which only 4% said they would downgrade their service and 2% said they would cancel it altogether.
Both EarthLink and NetZero have sharply reduced ad-spending in recent years. According to TNS Media Intelligence, NetZero spent $20.2 million in the first nine months of 2008, down from $30.6 million a year earlier. EarthLink spent $2.7 million in the first nine months, down from a year-earlier $7.8 million.
Their marketing reflects a budget-conscious sensibility the companies hope will resonate with consumers. EarthLink is promoting its offer through groups like the retiree organizaton AARP.
In keeping with its marketing message, NetZero's TV campaign reused Mr. Goldston's introduction from a prior ad. The rest of the commercial consists of on-screen text and voiceover. It cost less than $100,000, Mr. Goldston said, adding, "Normally we would spend $700,000 to $1 million."
NetZero's nationwide push is a departure for the company, which previously has focused its advertising on areas with low broadband penetration. The current campaign also targets city and suburban residents.
In the past, Mr. Goldston says, "we probably would not have been talking to those people."
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