Ted,
That sounds like a good way to start.
The link posted right before also has this
article which is very relevant to your post.
Regards
Victor
=================================================================
Netscape extends search
contracts
By Paul Festa and Dawn Kawamoto
Staff Writers, CNET NEWS.COM
April 30, 1998, 7:15 a.m. PT
As the clock runs out today on agreements between
Netscape Communications and its four main search
partners and Netscape works on plans for its own
search engine, the companies have agreed to extend
their current contracts for between 30 and 60 days,
according to Netscape.
Netscape currently maintains with Lycos, Excite,
Infoseek, and Yahoo deals under which those search
and directory companies pay Netscape to be
featured as premier providers on its highly trafficked
search page.
Under the current arrangement, Netscape rotates
these four companies as
the default provider.
According to documents
filed with the Securities
and Exchange
Commission, for the deals
covering April 30, 1997, to
April 30, 1998, Excite paid
a minimum of $8.3 million
for 40 percent of the
impressions, Infoseek paid
$12.5 million for 35
percent, Lycos paid $4.7
million for 20 percent, and
Yahoo paid $4.7 million for
5 percent.
All the involved parties
have been in the process
of renegotiating those
deals, but search providers
have balked at signing any
deals before Netscape
selects a partner for its own branded search engine,
which the company announced last week. Other
concerns of search companies include the amount of
rotations that will be available to the other premier
providers and the fee Netscape will charge after it
launches its own engine.
Just which search provider winds up striking a deal
with Netscape has become a subject of intense
speculation. Analysts point to Infoseek as a likely
candidate because of the relatively high proportion of
its traffic (26 percent) that currently comes from
Netscape's search page.
Lycos has not ruled out making a deal to be
Netscape's search partner, according to chief
executive Robert Davis, who contradicted published
reports. Davis told CNET's NEWS.COM that his
company would be interested in partnering with
Netscape on the Netscape-branded search engine
"depending on what the business arrangement will
be."
Excite is reportedly still under consideration.
Analysts doubt Yahoo will wind up the partner.
Inktomi's relationship with Microsoft makes it an
unlikely candidate as well.
Partnering with Netscape on its search engine may
wind up being a double-edged sword.
"It's a very awkward position for the partner to be
in," said Volpe Brown Whelan equity analyst Andrea
Williams. "They would be in a two-year deal with
Netscape, which [according to reports] would get
both cash and an equity stake in the company, only
to usher in a competitor. It's questionable what you
get if you win. If you win, do you really win?"
In addition to its deals with the four "premier" search
providers on its search page, Netscape also
maintains deals with five search and directory
companies that are featured as "marquee" partners.
These providers get a link on the Netscape search
page, but they are not rotated into the default search
position. The five are WebCrawler, AOL NetFind,
HotBot, LookSmart, and Snap, a division of CNET,
which publishes NEWS.COM. Contracts with these
five providers also were set to expire today but have
been extended for 30 to 60 days.
What kind of deal Netscape winds up cutting with
the Netscape-branded search engine partner is a
matter of speculation at this point. But what appears
clear is that the search providers will get fewer
default rotations once Netscape enters the picture
with its own service.
Mike Homer, who heads Netscape's Netcenter
revamp, said the company plans to continue offering
the other search engines to its users.
"We will continue to have third-party search
services. Netscape will be one of the many offered,"
said Homer. He denied Netscape is looking at
making its service the only search engine on
Netcenter.
The search engines largely say that they are not
overly concerned with a reduced cut of the action.
They note the proportion of the traffic they receive
from Netscape's Web site has greatly declined in the
past year.
"If we lost a small percent of the rotation we are
currently receiving, it would not have any effect [on
our revenues]," said Lycos's Davis. "No search
engine is sold out of its available inventory [for ads]."
And given the traffic growth that search engines
have encountered, any lost traffic from Netscape
may be offset by the growth the industry is currently
experiencing, search executives note.
Meanwhile, another question search engines face is
whether Netscape will greatly increase the fees it
charges to be in the rotation, said Robert Hood, chief
financial officer for Excite.
"After we hear what [Netscape] has to offer, we'll
decide what we want to do," Hood said.
Jeff Mallett, senior vice president of operations for
Yahoo, also noted that the company is waiting to see
what Netscape's underlying search program will look
like before making a decision to extend its contract.
Outside the premier provider button with Netscape,
Yahoo also has a two-year deal to operate and sell
advertising space on "Netscape Guide By Yahoo."
There is one year left on that deal. Under that
arrangement, Yahoo guaranteed Netscape $4.7
million against shared ad revenues for the first year
and up to $15 million in the second. And as part of
the deal, Yahoo paid Netscape a nonrefundable,
up-front "trademark license fee" of $5 million.
Analysts note that the combination of declining
click-through traffic and a lessening proportion of
default rotation sooner or later may separate
Netscape from its current partners.
"Yahoo may grin and bear it, as some of the other
sites will, for as a long as they can," said Forrester
Research analyst Chris Charron. "But six months
from now, if Yahoo's traffic [coming from
Netscape] drops from its current 8 percent to less
than 5 percent, Yahoo is likely to jump ship."
Mary McCaffrey, equity analyst with BT
Alex.Brown, agreed. "My sense is that Yahoo will
be a competitor to Netcenter over time and will
wean themselves away," she said. "They all could
get phased out, but there could be continued
relationships that would be for smaller amounts of
money, and a special relationship with one or more
companies" to build the Netscape-branded engine.
Paradoxically, while the search engines presently
pay Netscape for the privilege of appearing on the
Netscape search page, Netscape remains dependent
on them to make that page worth visiting.
"Even though they want, in time, to cut the umbilical
cord with all these companies, Netscape can't do it
until they've done a bit more work," Charron said.
"They can only do that once they've developed their
own content and features--like their own email and
news--so that users have reason to stay."
Indeed, analysts say one of Netscape's demands in
the current negotiations involves increasing
recirculation to Netscape pages. These provisions
would redirect users back to Netcenter or Netscape
search once they had run a search on another
search engine.
"Portals are receptive to that in direct proportion to
their dependence on Netscape," Charron said.
"Yahoo is likely to say, 'Forget about it.' But
Infoseek is likely to accept it."
Whatever its value in driving traffic to the search
sites, Netscape's search page remains extremely
valuable Web real estate. But the value of that
property is entirely contingent on the search button
at the top of its Navigator browser, and therefore on
the company's ability to stave off the competitive
onslaught of Microsoft's Internet Explorer browser.
"Either Netscape maintains 60 percent browser
market share or Microsoft winds up with 80
percent," said Bruce Smith, a New York City-based
independent Internet analyst. "That's just the way
software tends to go. Microsoft is gunning for them
really hard, and it's really up in the air. If Netscape
maintains 60 percent, they could make a business out
of Netcenter. Everything hinges on keeping 60
percent." |
