UK’s Freeserve Bids For Auction Market Share

Freeserve Plc, the United Kingdom’s largest Internet Service Provider, announced today that it is joining an already-crowded field by launching an online auction site next month.

The company announced that it is starting a joint venture with U.S.-based Classified Ventures, Inc. and will take an80 percent stake in the venture. Following the classic online auction model, Freeserve will charge a listing and transaction fee for items posted and sold on the site.

The London-based company is entering a market that is expanding by leaps and bounds in Europe. In the UK, Freeserve will face competition from Yahoo!, eBay and British-based QXL.com, its newest homegrown rival.

QXL, which saw its initial public offering sag earlier this month, launched its auction site in January of last year and has similar sites in Italy, France and Germany. The company’s IPO was priced at roughly one-third of its initial estimate.

Branching Beyond ISP

Freeserve took the UK Internet world by storm when it launched its free ISP and e-mail site in September of last year. Owned by giant consumer electronic chain Dixon’s, the company quickly overtook AOL Europe as the UK’s largest access provider. It currently has approximately 1.5 million accounts.

Since then, Freeserve has been, in a sense, a victim of its own success. Nearly 200 other free ISPs have been launched in the UK in the last year, including Netscape Online, an AOL/Bertelsmann joint venture, and one by the venerable BBC network. Freeserve’s first quarter figures reflected the increasing competition by revealing a drop in user numbers.

Accordingly, Freeserve has actively sought to branch out into content and e-commerce ventures. For example, Freeserve launched a women’s community site earlier this week, with channels for health, finance, travel, personal relationships and parenting.

Freeserve is also feeling financial pressure, as UK investors have been treating Internet stocks with a wary view. The company’s stock has hovered just above its July IPO price.

Despite investor skepticism, the UK e-commerce market is expected to keep pace with rapid expansion worldwide. Cambridge, Massachusetts-based Forrester Research estimates that it will reach $13 billion by 2001, up from $260 million last year.