NetZero Founders Say Farewell

The founders and "defenders of the free universe" are calling it quits, setting their sights on another entrepreneurial project dubbed Layer2 Networks.

by Jim Wager of internetnews.com [July 18, 2001]

The free ISP model, in which customers "pay" for Internet access by receiving non-stop banner advertising on a customized toolbar, took the nation by storm, bringing millions online and sparking the no-fee service debate that gripped the access industry.

The company spawned by Ronald Burr, Stacy Haitsuka, Harold McKenzie and Marwan Zebian was just one free ISP entry out of many that popped up all over the nation—promising free unlimited service. But NetZero quickly proved to be one of the most popular, out living rivals like Spinway and 1stUp.

While other free ISPs were going out of business or getting bought out by competitors, NetZero was able to remain solvent—although its cash burn rate put its business model clearly in jeopardy. Looking to stem its losses, company executives were forced to charge subscribers for ad-free access and look for other ways to build profits.

NetZero's recent merger with Juno Online Services was the culmination of those efforts to find revenue. A marriage of two of the largest ISPs in the nation. Juno, with its very successful free-to-pay model, provided a platform NetZero could use to bring its own millions of users online as paying customers.

But the merger of the fourth and fifth largest providers in the country was likely a sign to its creators that NetZero couldn't operate in the fashion they had envisioned. Now, instead of bringing the Internet to the masses, United Online—as the NetZero-Juno hybrid will soon be called—will look for ways to compete against its key competitors, AOL, EarthLink, and the Microsoft Network.

The four founders brought Mark Goldston, NetZero chairman and chief executive officer, onboard at a time when the free ISP model was experiencing the first signs of financial troubles to come. Goldston, a business strategist who specialized in consumer and technology branding, was brought in to maximize profits at the free ISP.

He had nothing but praise for the four founding members of the company he now controls.

"Before launching the service in 1998, they built a foundation of cutting-edge technologies that have enabled us to offer the quality Internet access that our millions of users have come to expect," Goldston said. "I have a lot of respect for their talents and innovative thinking, and I know I speak for everyone at NetZero when I wish them the best of luck in their exciting new venture."

The departure has been brewing for months and didn't come as a surprise to upper management at NetZero. In the past six months, Burr, Haitsuka, McKenzie and Zebian have been focusing less and less on day-to-day operations and more on creative projects, like high-speed Internet access and wireless projects, that gave them more time to develop their own fledgling company.

Stepping up to fill the void in those last months were Dr. Gerald Popek, who was hired as chief technology officer late last year, Goldston and Randy Tamura, who took McKenzie's position as vice president of software.

There's not a lot of information available about the new company the four ex-Defenders have created, only that it is called Layer2 Networks. Officials at NetZero would not say anything about the venture, saying only that it was not an ISP.

The domain, www.layer2networks.net, was registered April 4 under one Marvin Z of Westlake Village, CA, likely an alias of Marwan Zebian to avoid tipping media off to the imminent departure from NetZero. Currently, the Web site only features a logo with the words, "Bridging the Broadband Network."

Given the name of the company and its slogan, Marwan and company have likely decided to focus on some of the more dynamic aspects of Internet access, handled at the Layer 2 tunneling level. Also called a virtual line, layer 2 networking allows users to manage their dial up service away from the network, whether at home or through the company network.

Burr wished his former peers luck in the ISP business he leaves behind, knowing its in capable hands.

"I wish NetZero and United Online much future success," Burr said. "I have a great deal of respect for Mark Goldston and the rest of NetZero's current management team, and I know that the company is in very capable hands."

—End