Cheap Access to Net Costs Provider Dearly
The Business: Internet-access provider
Closed: October 1998
Causes of death: Too few subscribers to attract advertisers; flawed technology
When @bigger.net announced the launch of its service, on January 23, 1997, it generated the kind of news buzz that most start-ups can only dream of. "The announcement could change the business of connecting people to the Net," gushed USA Today, one of hundreds of newspapers, magazines, and TV shows to cover the story.
Favorable publicity wasn't all that the Internet-service provider (ISP) had going for it. @Bigger.net had nailed down $3 million worth of equipment loans from Silicon Valley companies, including Sun Microsystems, Netscape, and Bay Networks. And @Bigger.net's timing could hardly have been more opportune: even as Americans were signing up for the Internet in droves, ISP leader America Online was stumbling. Furious with AOL for offering $19.95 per-month all-you-can-eat access that it often couldn't serve up, many customers were shopping around for an alternative.
And what a deal @Bigger.net was offering. For a onetime $59.95 fee, customers could obtain lifetime Internet access. To add E-mail service cost only $10 more a year.
How could @Bigger.net charge so little? The key was selling ads that would appear in a running banner on every user's screen and signing up a projected 50,000 subscribers within six months. Advertisers would then flock to @Bigger.net, reasoned cofounders Jeff Fortin, Bram Ambrose, and Scott Smith. They predicted they'd get 100,000 users within the first year, and Smith, who had worked as a telemarketing manager at Fortin's environmental-consulting company, near San Francisco, forecast eventual advertising revenues of at least $32 million a year. But the founders discovered that a promising start would carry them only so far.
Always thinly capitalized, they had launched @Bigger.net with virtually no cash. From the beginning they faced a paradox. To gain a foothold in the lightning-paced ISP market seemed to demand taking a bold leap, as the founders were doing. To compete effectively, however, required the time and money to develop first-rate technology. @Bigger.net had neither. So the first version of the 40-employee company's software was "buggy," dampening customers' interest, Fortin recalls. "Version 2 of the product should have been the one we launched with," he concedes.
@Bigger.net also had to overcome widespread doubts about its business plan. For some, the guarantee of lifetime Internet access for a onetime fee conjured up a "pyramid scheme," says Chuck Greene, the company's bankruptcy attorney. @Bigger.net managed to enroll only 37,000 customers and attracted only a few small advertisers. ISPs like @Bigger.net that rely on advertising as their primary source of revenues generally haven't fared well, notes Kate Delhagen, an Internet analyst with Forrester Research Inc., based in Cambridge, Mass. "I was always very bearish on that business model," she says. "I thought the company should have been called @Bigger.not."
By September 1997 Fortin was scrambling to increase the value of the company's technology through joint ventures or licensing agreements with Sprint and EarthLink, another ISP. But other board members, notably Smith, didn't support the proposal, according to Fortin. Frustrated, Fortin quit as president and CEO the next month.
By August of last year, escalating problems had forced the company into Chapter 11 bankruptcy. Despite the hiring of a turnaround expert, @Bigger.net's fortunes continued their slide, and the company's bankruptcy was converted to a Chapter 7 liquidation on October 9. Brigadoon.com, an ISP headquartered in Seattle, purchased @Bigger.net's assets and is providing service to all @Bigger.net's former customers at no additional cost.
Smith and Ambrose could not be reached for comment. Fortin, meanwhile, has launched a new ISP, Surfaway. It has two employees and relies on a server-based software, @kidsafety.net, which restricts children's access to that portion of the Net deemed appropriate for them. He swears his new service's strength will be fully tested before the service is marketed. --Bronwyn Fryer