Is there life after dial up?
United Online Inc. is making a bet on it.
The Woodland Hills-based company is picking up the pace in its plan to shift its business away from the low-cost, dial-up Internet service that made it famous.
The company recently acquired online sweepstakes company MyPoints.com for $56 million from United Airlines Corp., following the March purchase of social networking site The Names Database for $10 million.
“The writing’s on the wall in terms of dial-up sort of coming to an end,” said Jason Avilio, analyst with First Albany Corp. Low-cost high-speed broadband is the main challenger to the company’s cheap dial-up offerings. Its NetZero and Juno Internet service brands are still cash cows for the company, generating monthly fees from 6.4 million subscribers. But the firm hasn’t been adding subscribers as it has in the past.
“Net subscribers have decreased every quarter for the last four quarters,” Avilio pointed out. “They realize that in order to have a business they have to diversify into higher growth areas of the market.”
Those areas include social networking sites like Classmates.com, which the company acquired in 2004, the digital photo-sharing network PhotoSite, online sweepstakes programs and e-marketing sites. The company also launched its own voice over Internet protocol (VOIP) service last year. (Phone service over Internet lines instead of telephone lines.)
The hodge-podge approach has its risks. “They’re trying to figure out where to take the business,” Avilio said. “VOIP could get pretty expensive trying to compete with eBay and Google or Yahoo and the telecom companies.”
“Our purchase of MyPoints.com represents another major step forward in United Online’s strategy of expanding our growing content and commerce business,” said Chief Executive Mark Goldston in a press release.
United Online will release earnings on May 3 for the first quarter ended March 31. The company reported net income of $12.4 million on revenues of $120 million for the fourth quarter ended Dec. 31, down from $12.6 million in net income and revenues of $133 million for the prior quarter.
