"AOL also has a right to negotiate with Infospace before it agrees to any takeover offer,..."
Sunday January 31 2:03 PM ET
Microsoft Spin-Off Targets Big Internet Portals
By Martin Wolk
SEATTLE (Reuters) - It seems as if everyone on the Internet wants to be a portal these days, but not Naveen Jain, founder and chief executive officer of Infospace Inc.
Instead, the former Microsoft Corp. (Nasdaq:MSFT - news) executive has positioned his growing company to supply ''private label'' content to some of the Internet's biggest players including America Online Inc. (NYSE:AOL - news), Yahoo! Inc., Microsoft and Netscape Communications Corp. (Nasdaq:NSCP - news)
''Our goal is not to become a portal,'' Jain said in an interview at the company's headquarters in suburban Redmond, Wash. ''Our goal is to become a portal for portals. If a portal wants to get all the services they need, they can come to one single place.''
That place, Jain hopes, is Infospace, the behind-the-scenes provider of telephone directories, maps, directions, restaurant listings, classified advertising and other ''real world content'' for some 1,500 Web sites reaching four out of five Web users.
Analysts say Jain's concept of packaging and selling content is likely to become increasingly popular as Web sites and service providers turn to third parties to expand their offerings in an effort to keep users from surfing off into other domains.
''I think you're going to see much more embedded services on sites,'' analyst Peggy Ledvina of Dain Rauscher Wessels said. ''Let's face it, the big portal guys can't specialize in everything. Why not cut a deal with someone who can supply the content they need?''
She said Infospace appears poised for success in part because of its ability to customize data to match the ''look and feel'' of customer Web sites or to fit on the small screens of wireless telephones and other consumer devices being hooked up to the Internet.
Investors apparently like the story, too, and have bid up the company's stock to Friday's Nasdaq close of $57.50 a share from its December offering price of $15, giving it a market valuation of more than $1 billion.
Now the 3-year-old company is planning to expand its offering to provide a wide range of data about products available for sale on the Web.
''Our goal is to do the same thing with commerce as we did with content,'' said Jain, a native of India.
Jain has studiously tried to make Infospace a neutral supplier of data, and his board of directors includes executives of both Microsoft and Netscape.
Last year the company forged a particularly strong relationship with Internet giant America Online Inc., which has warrants to buy nearly 5 percent of the smaller company over the next four years.
Jain said the warrants are part of an arrangement intended to make sure AOL continues driving traffic through the Infospace directory search services.
''We want to constantly keep them on our side,'' Jain said.
AOL also has a right to negotiate with Infospace before it agrees to any takeover offer, although Jain said the company's aim is to remain independent.
Infospace generates most of its revenue through advertising, relying on cooperative sales arrangements with yellow pages publishers and others.
Total revenues were about $9 million in revenue last year, a figure expected to rise to $24 million this year, with the company expected to break even in the fourth quarter, analysts said.
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