NetZero Scores With Halftime Strategy

NetZero’s business game plan seems fairly radical--offer free Internet access to consumers, many of whom now are paying $200 or more a year to such established competitors as AOL and Earthlink. But the Westlake Village-based company is sticking with some tried-and-true methods when it comes to advertising and marketing, most notably a high-profile sponsorship of the NBA halftime report on NBC.

As professional basketball’s championship bounces toward a conclusion, NetZero says the strategy it unveiled in late December--and now continuing with halftime appearances during the championship series--has been effective in luring consumers. “We’re very happy with what we ended up with,” said Brian Woods, NetZero’s chief marketing officer. “We’ve got the hometown team in there, and the demographics of the NBA--which skew young and male--are exactly what we’re looking for.”

NetZero isn’t the only Internet company adding a sports marketing page to its playbook.

AOL on June 5 signed a multiyear joint-marketing agreement with the NBA, and Ourhouse.com has joined Major League Baseball in a marketing agreement promising $1 million to a lucky contestant if the right pitcher hurls a perfect game. Enough racing cars carry logos of such online sponsors as Northern Light Technology Inc. to fill a good-size parking lot.

Such familiar brands as Pepsi, General Motors and Visa long have used professional sports and the Olympic Games to help polish their brands. Sports marketers say “dot-coms” and Internet companies are betting that the appeal of teams such as the Los Angeles Lakers and the Indianapolis Pacers will help them build brand awareness--and, ultimately, revenue and profit.

“Research shows that the average IRL [Indy Racing League] fan is 40% more likely to own a computer and be an Internet user than the average U.S. population,” said Jeff Sirlin, sponsorship marketing manager for Northern Light, the Boston-based operator of the NorthernLight.com search engine. “That makes the IRL very attractive to us.”

NorthernLight.com won’t say what it paid for the IRL alliance, but the company sets the advertising and public relations value of its five-year contract at $50 million. “It’s a major part of our marketing, but not the majority of what we’re spending,” Sirlin said. “We think that, after just four races this season, we received well above $10 million in TV exposure.”

For its money, NorthernLight.com gets its name mentioned during radio and television ads promoting what’s now known as the Indy Racing Northern Light Series. The company’s logo appears on the race cars and is evident during racing coverage.

NetZero won’t say how much it spent on the NBC deal, but Securities and Exchange Commission filings suggest the company will pour $25 million to $50 million into marketing and advertising during the year ending June 30. Woods said the NBC deal now accounts for a significant portion of that total.

NetZero, which has 4 million registered users, says the “NetZero at The Half” deal prompted immediate results. When the first halftime show aired on Christmas Day 1999--and the company asked consumers to call for free CDs needed to access the service, “we ended up shutting down the telephone switchboard in Canada, where traffic was directed,” Woods said. “That was fixed the next day, but it’s the kind of problem you want to have.”

Sports affiliations, though, represent just part of an effective marketing campaign. NetZero was deluged with sports-marketing proposals after signing with NBC. The company has signed a deal with a racing team, but passed on the other deals. “Our demographic is very broad,” Woods said. “You will see lots of different kinds of [marketing] from us in the future.”

Whether the high-profile NBC deal will help NetZero survive in the competitive ISP world is uncertain. NetZero isn’t the only company spending heavily to market free Internet access. The company also faces increasingly stiff competition from such companies as Spinway.com, the San Francisco-based media company that provides free private-label Internet access for such well-known companies as Kmart Corp.

Spinway’s business model lets companies such as Kmart, which already have spent heavily to establish their own name brands, incorporate free Internet services into their Web sites. Spinway, like NetZero, also generates revenue from advertising that consumers see while they’re online.

Some online observers believe that companies such as NetZero face an increasingly uphill battle for consumers. “I think the opportunity to build an independent brand name for a free ISP has passed us by,” said Dylan Brooks, an analyst with Jupiter Communications. “The real opportunity now seems to be with branded, ad-supported Internet access.” Brooks notes that Kmart’s Bluelight.com registered 1 million members in just two months.

NetZero’s NBC alliance also underscores the increasingly complex online world. When the company’s logo appears during the NBA halftime report, consumers obviously are being urged to sign up with NetZero. But visitors to NBC’s online Web sites are offered free NBC-branded Internet access engineered by Spinway.

“I guess the lesson is that, with the growing number of companies offering free access, it’s going to be increasingly difficult to sign up and keep consumers,” Brooks said.