The Freeserve Story: Part Two. Making lots of money by giving it away

After getting the yes from Dixons, I started to work with Mark Danby from the Dixons Corporate Development Department on the business plan. We guessed all sorts of numbers, and once we finished it, and everyone was happy, we put the business plan in the drawer and never touched it again.

We chose a Leeds based company, Planet Online, to outsource our technology. It came about through a chance meeting at Leeds Utd. At the time Packard Bell were the shirt sponsors of Leeds Utd, and the MD of Packard Bell got talking to the MD of Planet at a football match. He told him that we were looking for a technology partner, it led to meetings, and a deal was struck. 

The MD and Owner of Planet was Peter Wilkinson, he showed me around and introduced me to the key people. The CTO, Philip Taysom, would be the key man in this project since his team had to make everything work. David Watt was the project manager, and Rob Wilmot, he worked for Philip building websites and would build our website.

So, of to work we went to build the technology and the portal. Philip was stressed trying to get enough bandwidth capacity, modems and the sign-up software ready for an ISP of this size.  

The name I come up with for our new ISP was, Channel 6, I thought we could become the sixth channel. We bought the domains and started doing content deals to fill the site. Everything was going well, and by April 98 we were almost finished. The business model was like everyone else at the time, ￡10 a month, and we would have made a considerable margin on that.

The only problem was that Dixons were dragging their feet and we had no firm date to launch Channel 6.

Then everything changed, in June 1998 BT announced a new ISP, 'BT Click', a local rate phone call plus a penny a minute.

When I read the press release, I thought who's going to pay a ￡10 month when you can 'pay as you go,' we're dead even before we've launched Channel 6.

I went to see Peter to talk about BT Click, we agreed we had to do something as good or better than BT Click. About a week later, Peter called a meeting at the Planet London office. At the meeting were Peter, David Watt, John Pluthero (head of Dixons Corporate Development) and me.

Peter announced that instead of charging a ￡10 a month, we could go free and make money from the local rate phone call.

When BT was privatised, the rule was that when a call starts on one network and finishes on another, BT has to share that money, it's called an interconnect fee. Philip Taysom's network engineers Cliff Wood and John Murray figured with enough minutes; we could make more money from the interconnect fee than a fixed monthly subscription.

That changed everything. It makes things even simpler, with no direct debits to set up, and everything else can stay the same. So, we decided to change the business model and make it a free ISP, things now moved faster. 

Someone in Dixons suggested we change the name of the service to 'Freeserve,' similar to CompuServe. I wasn't happy with that because in the future we might not be free. Someone pointed out "Don't worry, the Carphone Warehouse don't sell car phones and are not a warehouse," and with that, we agreed to change the name from Channel 6 to Freeserve. 

We designed a new logo and took the Channel 6 logo off the website and replaced it with the Freeserve logo; it took ten minutes.

The only problem was that someone in Norway owned Freeserve.com, we registered all the other domains and decided to launch as Freeserve.net. 

We thought however, we should own Freeserve.com, so we offered the guy in Norway ￡2,500 for his domain, and he accepted. He thought Ajaz Ahmed in Huddersfield was buying it; he didn't know that Dixons was behind it. We only managed to get it transferred to me the day before the Freeserve launch, I've always wondered what he must have thought when he saw the press the day after.

I've got to stress that we were not the first free ISP in the country. At least two others launched free ISP's before us, Connect Free and X-Stream, so we needed to be different. We decided to give free email and webspace even though few people knew what to do with webspace, but it allowed us to claim, "The UK's first fully-featured free ISP."

Dixons called a press conference for 11am, 22nd September 1998 in the FT building in London to announce the launch of Freeserve. The response was great, and the journalist tried to find faults. Some focused on the ￡1 a minute support line. We priced it that way to stop people from calling support because Freeserve was simple; we thought users wouldn't need much help because the installation was so easy. 

I remember the BBC going to AOL to ask them what they thought of this new service and they kept on talking about all sorts of things that AOL did better than Freeserve, they rejected our business model, "it's not what customers want." The BBC had a news website at that time, and they used it to announce our new service, read the story on the old site, how different the site looks now. https://news.bbc.co.uk/1/hi/sci/tech/177467.stm 

The country went wild, and people were rushing into Dixons, Currys and PC World to pick up CD's, they loved it because there was no commitment, if you like it, carry on using it, if you don't like, don't use it.

Philip and his team were under even more pressure to keep the network running with modems coming straight from the airport to plug into the servers just in time. Peter sold Planet to Energis (which was later bought by Cable & Wireless) around the time of our launch. It didn't make any difference to us since Planet didn't have a stake in Freeserve.

The minutes kept on going up, and the money from BT kept going up, the model worked beautifully. We had no marketing costs and what people didn't realise was, there were only two people on the payroll, me and Mark Danby. 

Mark worked from Dixons head office, and I borrowed a desk at Planet, our costs were next to nothing. I bought a PO Box in Leeds from the Post Office and put that address on the website and CD's so we could re-direct the post in the future.

We needed someone to answer the increasing number of customer emails, I asked a Dixons shop manager that I had known for many years if he wanted to work for us, he said yes, and Chris Fletcher became our first hire. We needed our own office and moved to 31 The Calls, in the trendy part of Leeds. I've always liked IKEA, so went IKEA Birstall and bought the office furniture, it looked great.

When we moved, Rob decided that he wanted to work for us, he joined us at the end of November initially for three days a week moving to five as we got busier. By December we were already the largest ISP in the UK employing just a hand full of people. Mark was the general manager, Rob looked after the website, Chris answered all the email and I looked after business development.

A few weeks after the launch we got a call from a national newspaper asking to see us, Mark and I went down to see them. After a cup of tea, the Operations Director said, "I'll get to the point, we like what you're doing, and we want to buy half the company." We both sat there looking at each other, and I said: "We don't want to sell, we don't need any money or your distribution channels." He wasn't happy, and we left. I said to Mark outside "I bet we could have got ￡20m," little did we know.

At the beginning of 1999, the dot.com boom had started, all of a sudden there was a lot more people on the internet, there was now a bigger market for start-ups to sell their products or services.

Everyone had a business plan to make them a fortune which meant everyone wanted to talk to me, everyone wanted to be on our website. People figured that they could raise more money or float their business if they had an agreement with Freeserve.

After getting the yes from Dixons, I started to work with Mark Danby from the Dixons Corporate Development Department on the business plan. We guessed all sorts of numbers, and once we finished it, and everyone was happy, we put the business plan in the drawer and never touched it again.

We chose a Leeds based company, Planet Online, to outsource our technology. It came about through a chance meeting at Leeds Utd. At the time Packard Bell were the shirt sponsors of Leeds Utd, and the MD of Packard Bell got talking to the MD of Planet at a football match. He told him that we were looking for a technology partner, it led to meetings, and a deal was struck. 

The MD and Owner of Planet was Peter Wilkinson, he showed me around and introduced me to the key people. The CTO, Philip Taysom, would be the key man in this project since his team had to make everything work. David Watt was the project manager, and Rob Wilmot, he worked for Philip building websites and would build our website.

So, of to work we went to build the technology and the portal. Philip was stressed trying to get enough bandwidth capacity, modems and the sign-up software ready for an ISP of this size.  

The name I come up with for our new ISP was, Channel 6, I thought we could become the sixth channel. We bought the domains and started doing content deals to fill the site. Everything was going well, and by April 98 we were almost finished. The business model was like everyone else at the time, ￡10 a month, and we would have made a considerable margin on that.

The only problem was that Dixons were dragging their feet and we had no firm date to launch Channel 6.

Then everything changed, in June 1998 BT announced a new ISP, 'BT Click', a local rate phone call plus a penny a minute.

When I read the press release, I thought who's going to pay a ￡10 month when you can 'pay as you go,' we're dead even before we've launched Channel 6.

I went to see Peter to talk about BT Click, we agreed we had to do something as good or better than BT Click. About a week later, Peter called a meeting at the Planet London office. At the meeting were Peter, David Watt, John Pluthero (head of Dixons Corporate Development) and me.

Peter announced that instead of charging a ￡10 a month, we could go free and make money from the local rate phone call.

When BT was privatised, the rule was that when a call starts on one network and finishes on another, BT has to share that money, it's called an interconnect fee. Philip Taysom's network engineers Cliff Wood and John Murray figured with enough minutes; we could make more money from the interconnect fee than a fixed monthly subscription.

That changed everything. It makes things even simpler, with no direct debits to set up, and everything else can stay the same. So, we decided to change the business model and make it a free ISP, things now moved faster. 

Someone in Dixons suggested we change the name of the service to 'Freeserve,' similar to CompuServe. I wasn't happy with that because in the future we might not be free. Someone pointed out "Don't worry, the Carphone Warehouse don't sell car phones and are not a warehouse," and with that, we agreed to change the name from Channel 6 to Freeserve. 

We designed a new logo and took the Channel 6 logo off the website and replaced it with the Freeserve logo; it took ten minutes.

The only problem was that someone in Norway owned Freeserve.com, we registered all the other domains and decided to launch as Freeserve.net. 

We thought however, we should own Freeserve.com, so we offered the guy in Norway ￡2,500 for his domain, and he accepted. He thought Ajaz Ahmed in Huddersfield was buying it; he didn't know that Dixons was behind it. We only managed to get it transferred to me the day before the Freeserve launch, I've always wondered what he must have thought when he saw the press the day after.

I've got to stress that we were not the first free ISP in the country. At least two others launched free ISP's before us, Connect Free and X-Stream, so we needed to be different. We decided to give free email and webspace even though few people knew what to do with webspace, but it allowed us to claim, "The UK's first fully-featured free ISP."

Dixons called a press conference for 11am, 22nd September 1998 in the FT building in London to announce the launch of Freeserve. The response was great, and the journalist tried to find faults. Some focused on the ￡1 a minute support line. We priced it that way to stop people from calling support because Freeserve was simple; we thought users wouldn't need much help because the installation was so easy. 

I remember the BBC going to AOL to ask them what they thought of this new service and they kept on talking about all sorts of things that AOL did better than Freeserve, they rejected our business model, "it's not what customers want." The BBC had a news website at that time, and they used it to announce our new service, read the story on the old site, how different the site looks now. https://news.bbc.co.uk/1/hi/sci/tech/177467.stm 

The country went wild, and people were rushing into Dixons, Currys and PC World to pick up CD's, they loved it because there was no commitment, if you like it, carry on using it, if you don't like, don't use it.

Philip and his team were under even more pressure to keep the network running with modems coming straight from the airport to plug into the servers just in time. Peter sold Planet to Energis (which was later bought by Cable & Wireless) around the time of our launch. It didn't make any difference to us since Planet didn't have a stake in Freeserve.

The minutes kept on going up, and the money from BT kept going up, the model worked beautifully. We had no marketing costs and what people didn't realise was, there were only two people on the payroll, me and Mark Danby. 

Mark worked from Dixons head office, and I borrowed a desk at Planet, our costs were next to nothing. I bought a PO Box in Leeds from the Post Office and put that address on the website and CD's so we could re-direct the post in the future.

We needed someone to answer the increasing number of customer emails, I asked a Dixons shop manager that I had known for many years if he wanted to work for us, he said yes, and Chris Fletcher became our first hire. We needed our own office and moved to 31 The Calls, in the trendy part of Leeds. I've always liked IKEA, so went IKEA Birstall and bought the office furniture, it looked great.

When we moved, Rob decided that he wanted to work for us, he joined us at the end of November initially for three days a week moving to five as we got busier. By December we were already the largest ISP in the UK employing just a hand full of people. Mark was the general manager, Rob looked after the website, Chris answered all the email and I looked after business development.

A few weeks after the launch we got a call from a national newspaper asking to see us, Mark and I went down to see them. After a cup of tea, the Operations Director said, "I'll get to the point, we like what you're doing, and we want to buy half the company." We both sat there looking at each other, and I said: "We don't want to sell, we don't need any money or your distribution channels." He wasn't happy, and we left. I said to Mark outside "I bet we could have got ￡20m," little did we know.

At the beginning of 1999, the dot.com boom had started, all of a sudden there was a lot more people on the internet, there was now a bigger market for start-ups to sell their products or services.

Everyone had a business plan to make them a fortune which meant everyone wanted to talk to me, everyone wanted to be on our website. People figured that they could raise more money or float their business if they had an agreement with Freeserve.

It got so bad that I had to take my mobile number off my business cards; the only way to get in touch was email or the office number. I'd drawn up a list of channels for the website like news, sport, shopping, travel, money etc... and lots of companies wanted to be on our site, we were in a good position. 

Business was booming so in early 1999, Dixons decided they wanted to separate Freeserve from the main group and float the business. John Pluthero, who was now the Head of Service and Distribution in the Dixons group, was brought in as the CEO to do the difficult and complicated job of getting Freeserve ready to float on the stock market. 

One problem was that we didn't employ many people, we set about hiring more people, we made jobs for people to do, if you look at the prospectus, it says 'average number of employees, 12.' It was also the right time to switch from Freeserve.net to Freeserve.com. 

We floated on the London stock exchange and the NASDAQ at the end of July 1999 with a market cap of ￡1.5bn, and we were only ten months old. The share price kept going up, we overtook our parent company, Dixons, and even entered the FTSE 100. At our peak, we were worth a fantastic ￡9bn; that's what you call a boom.

The business kept on growing and getting more complicated. Rob had to stand to one side because he didn't have the experience, Stratis Scleparis, the CTO at AOL, joined us as our CTO. 

Some fake news about me in The Daily Mirror.

Internet Age magazine awarded me a prize, and at the end of the long interview, the journalist asked me, "How much do you get paid?" I said, "It's not something I want to talk about" and then for some stupid reason I said, "You've got to remember ￡20,000 goes a long way in Leeds." The Daily Mirror saw this and printed this article with the headline "He's just ￡2.9bn for Dixons. Guess how much they pay him. He's still on ￡20,000 a year" Dixons quickly arranged for Hugh Pym from the BBC news to give me some media training. For months people stopped me to ask if that's what I got paid, I was paid a lot more as a manager. The Mirror printed an apology the day after, but no one read that.

Like all good things, the boom was followed by a bust, and our share price started to go down. Dixons decided that it would be an excellent time to sell the business, a deal for ￡6bn fell through, in the end, Freeserve was sold to France Telecom in April 2001 for ￡1.65bn. Not bad for a three-year-old company.

A couple of months after the sale, I sold my shares and left Freeserve to start a new chapter of my life. 

Where is Freeserve now? France Telecom made a big mistake, they changed the name from Freeserve to Wanadoo which is their ISP in France, and when that didn't work it became Orange Broadband. 

I've never written about the Freeserve story before because some people remember it differently, and certain people greatly exaggerate the role they played.

You can see from all the comments on LinkedIn where this story first appeared, the many people who were there at the beginning, people who helped me make Freeserve a reality and kick start the dot.com boom in this country.

How do you make lots of money by giving it away? 

Most of the things you do on the internet, you don't pay anything for, the key is to get lots of people to use your service and all of a sudden, you are worth lots of money.

We made lots of money because the first thing customers saw was our website, we made ￡2.5m a year just from the search engine and many millions from our many other channels because we had lots of traffic. 

We got a fraction of a penny from each minute, but when you have more than a billion minutes a month, that's a lot of fractions. Our business model was to 'collect small amounts of money from lots of people.' Apple have the same model, you hear a nice tune, and 99p later is yours. 

The biggest thing that people underestimate in business is how difficult it is to acquire a customer. "If you build it, they will come," no, they won't, it might cost you more money to acquire the customer than the money you'll make from them

We were not the first free ISP, and the reason we were more successful than them was because it cost us nothing to acquire the customer. Our route to market is what made us different, millions of people were walking around our shops picking up CD's, we didn't have to buy expensive adverts. 

I recently met the Founder of PlusNet, who was sold to BT. He was amazed that we did the direct opposite of what they did. They built their own network, wrote their own code, employed lot's more people and spent a fortune acquiring customers. Our model was much better. 

Freeserve has been an amazing journey. I've met everyone from the Queen to the President of the United States, and many more famous personalities. Freeserve has touched many people lives, for many people, Freeserve was the first time they experienced the internet. 

People made money from buying and selling shares at the right time. I sat next to a manager at a Dixons sales conference, she told me she'd bought a house because the Dixons share price in her share-save scheme had gone up so much. I met a Dixons manager in Leeds who told me he had bought a Rolls Royce, when I asked him "why?" He said that he was leaving Dixons after many years to start his own business, chauffeur-driven wedding cars, "well done John" I said to him. 

I've received a British Empire Medal from the Queen, not for Freeserve but for helping children in schools and colleges. I've met some fantastic people that have helped me on my journey, some of those people have gone on to become good friends. 

All this happened because no-one in PC World Leeds could tell me how to get onto the internet and I did something about it so people could get onto the internet.

Thank you for reading the Freeserve story.  

This is not the book, it's a shortened version of the story. Many other things happened like Packard Bell planned to be a partner but they dropped out before Freeserve launched. In between all off this, I opened a successful Indian food takeaway, but that story is for another day.