SAN FRANCISCO - BlueLight.com, Kmart's online alter ego, Monday took over a failed business partner that provided free Internet service to millions of computer users, preserving a vital customer link in the heart of the holiday shopping season. The move assures that about 6 million people who surf the Web through a network created by Sunnyvale-based Spinway Inc., will continue to have free Internet access at least through year's end.
After abruptly closing its doors Friday and laying off the last of its 100 employees, Spinway appeared poised to pull the plug on its service until BlueLight stepped in Monday. About 30 Spinway workers will help run the Internet service for BlueLight.
San Francisco-based BlueLight plans to evaluate whether it should charge for the Spinway service early next near, said company spokesman Dave Karraker. "For now, we are viewing this as a necessary marketing expense to reach customers."
BlueLight didn't divulge financial terms of the takeover, but the company will probably incur its biggest expense running a network that provides dial-up access to the Internet in 5,000 cities.
Spinway is the latest in a line of free Internet service providers, or ISPs, to run into trouble amid rapid growth. Spinway was adding about 30,000 users each day to its service just before its failure.
Companies offering free ISPs believe they can make money by selling a barrage of advertising shown to Web surfers using their services. However, that formula hasn't worked so far.
Other free ISPs struggling to survive include 1st Up, which is owned by CMGI, and NetZero, said Lydia Leong, a senior analyst for the Gartner Group in San Jose.
Recommended for you
Westlake Village-based NetZero, a publicly traded ISP, lost $91 million in its most recent fiscal year ending June 30.
"This isn't a good time to be in the free ISP space," Leong said. "The jury is still out on whether this business model can work at all."
Founded in 1999, Spinway provided free Internet access through partnerships forged with BlueLight, Costco, Hewlett-Packard, Ace Hardware's OurHouse.com, Spiegel Catalog, Barnesandnoble.com and NBCi.com.
Spinway viewed its alliances with retailers like BlueLight and Ace Hardware as a way to reach budget-conscious households that remained off-line to avoid the monthly bill, roughly $20, typically charged by Internet service providers, or ISPs.
Since its launch last year by Kmart, BlueLight has accounted for most of Spinway's traffic. About 5.2 million people signed up for Spinway's free Internet service offered through BlueLight.
BlueLight offered to continue providing free Internet service to customers at Spinway's other partners, if the businesses paid a fee. Costco, Spiegel and Barnesandnoble.com, accepted BlueLight's offer, Karraker said.
Keep the discussion civilized. Absolutely NO
personal attacks or insults directed toward writers, nor others who
make comments. Keep it clean. Please avoid obscene, vulgar, lewd,
racist or sexually-oriented language. Don't threaten. Threats of harming another
person will not be tolerated. Be truthful. Don't knowingly lie about anyone
or anything. Be proactive. Use the 'Report' link on
each comment to let us know of abusive posts. PLEASE TURN OFF YOUR CAPS LOCK. Anyone violating these rules will be issued a
warning. After the warning, comment privileges can be
revoked.
Please purchase a Premium Subscription to continue reading.
To continue, please log in, or sign up for a new account.
We offer one free story view per month. If you register for an account, you will get two additional story views. After those three total views, we ask that you support us with a subscription.
A subscription to our digital content is so much more than just access to our valuable content. It means you’re helping to support a local community institution that has, from its very start, supported the betterment of our society. Thank you very much!
(0) comments
Welcome to the discussion.
Log In
Keep the discussion civilized. Absolutely NO personal attacks or insults directed toward writers, nor others who make comments.
Keep it clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't threaten. Threats of harming another person will not be tolerated.
Be truthful. Don't knowingly lie about anyone or anything.
Be proactive. Use the 'Report' link on each comment to let us know of abusive posts.
PLEASE TURN OFF YOUR CAPS LOCK.
Anyone violating these rules will be issued a warning. After the warning, comment privileges can be revoked.