ISP as Marketing Plan

An ISP needs no servers, and no software. All an ISP really needs is subscribers. MiracleNet's business is serving subscribers to vendors. Instead of an ad budget, the company returns to subscribers a portion of ad revenues and commissions.

by Alex Goldman
Associate Editor, ISP-Planet
[August 28, 2000]

MiracleNet, based in Farmingdale, New York, is a virtual ISP with a twist (or, at least, a portal). Not only does MiracleNet outsource the hardware through CMGI's Internet Access Provider NaviPath — MiracleNet also has numerous content alliances and sales affiliations, each providing its own revenue stream.

Upsell
MiracleNet's basic income is from Juno's "upsell" model: Obtain subscribers by offering free Internet access, and then sell those subscribers premium services.

The free basic service gives a subscriber a 3 MB web-based mailbox, a calendar and address book, opt-in email "reminders" such as discounts (in the terms of service, subscribers agree to read at least one targeted e-mail per day), money back at the MiracleMall, 50MB of storage for files such as music, and each subscriber gets paid a percentage of revenues generated (more on this get-paid-to-surf revenue model later).

Gold service costs $9.95 per month (if paid annually, otherwise it's $12.95 per month). Gold subscribers are entered in a sweepstakes with a chance to win a Caribbean cruise for two every fourteen days, a usenet feed from NewsGuy, and half-price movie tickets for life at 17 national chains. Gold subscribers also get an extra level of revenue.

MiracleNet will launch Platium service in September. Platinum service will cost $19.95 per month and will provide ad-free service.

Refer-a-friend
MiracleNet is a Multi-Level Marketing plan, in which current users earn money by referring new users — even free subscribers can earn money.

The payment plan has several levels. Any subscriber earns money from someone referred by someone the subscriber referred (that's three levels down).

The basic service gives users up to five levels of income, and the gold service adds a sixth level of income. Users get paid 10% of the ad revenue from each subscriber. This should be between $0.10 and $0.25 per subscriber.

Here's the revenue table from the MiracleNet web site:

How Shared Revenue Works:
Referral Level	% of Monthly Ad Revenue	Gold Membership Monthly Bonus	Long Distance Monthly Bonus	Health & Safety Products Monthly Bonus
1	10%	Up to $10 first month, $1 thereafter	25¢	5%
2	10%	$1	25¢	5%
3	10%	50¢	25¢	5%
4	10%	50¢	25¢	5%
5	10%	50¢	25¢	5%
6	10% (Gold Members Only)	50¢	25¢	5%

Each Gold Membership costs $9.95 per month, but that money is also partially returned to subscribers.

Coming soon is a long-distance phone service. The service claims to be 5¢ per minute nationwide anytime. Subscribers get $0.25 back per month.

Also coming soon is a shop of "health and safety" products. Subscribers get 5% of the price of each purchase made.

CEO Lawrence Marcus (Larry) says, "I don't feel we're making a mistake by forgoing an advertising campaign. We have a sales force: Our subscribers. They get paid by results."

No advertising campaign
It's true. There's no ad budget. Instead, the money that would go into an ad budget and sales force goes back to the subscribers who are bringing in business.

Marketing machine
Larry Marcus says, "this business is about marketing. The web is a medium, not a business. It's a new sales channel."

Money from the sales affiliations adds to revenue from banner ads, targeted email advertising (you have to sign up to at least five hobby lists when you join), and, where applicable, subscription revenue.

MiracleNet's MiracleMall includes software from Babbage's Software, Etc. It also features Barnes & Noble books, astrology charts from iVillage, and gifts for kids from FamilyWonder.com.

MiracleNet and MiracleNet's subscribers get a portion of each purchase on the MiracleMall.

Virtual backbone
All of MiracleNet's services are outsourced. Webhosting comes from Intira Corporation. Web-based e-mail currently comes from Commtouch. The Platinum service will come from NaviPath (the free service is through FreeI).

Success in time
24/7 Media, NaviPath, and several other corporations that MiracleNet works with are CMGI companies. Asked whether MiracleNet is allied with CMGI, Larry Marcus said, "we work with several CMGI companies, but we chose each because it was the best, and in some cases we were working with them before they became a part of CMGI."

The company MiracleMail.com was launched with advertising. In 1999, the company hired 24/7 Media Inc. to coordinate an online ad campaign. This gave the ISP a subscriber base.

The free service, however, has only just been launched (along with a corporate name change from MiracleMail to MiracleNet). MiracleNet already has tens of thousands of subscribers. These subscribers are active.

Any subscriber who does not log on for a week loses the money they would have earned that week. Anyone who does not log on for sixty days is considered inactive.

The bottom line
So will this business plan succeed? This single fact makes it credible: MiracleNet only pays after it receives money.

I signed up for the service and found only one flaw: Web-based email is slow. But I had no other problems.

The bottom line should be black, not red.

—End