"NewsGuy benefits from Usenet popularity"
- Silicon Valley Business Ink -
NewsGuy, a Sunnyvale-based Usenet provider owned by parent company Pathlink Technology Corp., not only has been profitable since its first year in operation, never needed outside investment capital and doesn't rely on advertising dollars, but it is experiencing increased business during the past year.
The rise and fall of Internet content providers, especially those that sought advertising-based revenue and gave content away for free, has been well-documented.
But perhaps the least-publicized success story in online content is Usenet, a worldwide bulletin board system apart from the World Wide Web. Usenet originated in 1979, long before the advent of the Web, as a way for universities to communicate over early modems.
Usenet quickly evolved and now boasts more than 30,000 different forums, called newsgroups, representing interests as varied as the demographically diverse people who use it.
NewsGuy is a company that provides access to the myriad of newsgroups that comprise Usenet. From a business standpoint, the success of Usenet lies with the companies that maintain and supply access to Usenet, such as NewsGuy.
Individual users pay $12.95 per month to NewsGuy to access the Usenet newsgroups. But the bread and butter for NewsGuy are Internet service providers, telecoms and businesses that want to provide their customers with Usenet access.
And since maintaining Usenet services involves a large investment in servers and bandwidth, ISPs are cutting costs by outsourcing to Usenet providers.
"It's really a bear to try and run something like this," says Joe D'Alessandro, director of marketing for NewsGuy. "So they outsource to us."
NewsGuy operates with 45 servers, multiple OC-3 lines (each is equivalent to the bandwidth of 360 T-1 lines) and more than 5 terrabytes of content storage. So while ISPs' end users often demand Usenet access, the ISPs can't afford to host it themselves, and instead pay as little as $60 per month (for small and midsize ISPs) for the service.
ISPs can spend as much as $35,000 per month maintaining Usenet services with their own bandwidth and servers.
But just because Usenet providers are doing well, don't expect to see many new players in this space. For one, the costs of bandwidth and storage equipment are extremely high, and the main assets the existing companies have are long-term relationships and the ability to advertise through existing customers.