Compaq's AltaVista strategy emerges

Parent company Compaq Computer made a long-awaited but clear indication yesterday of its plans to build AltaVista into one of the most trafficked sites on the Web after acquiring online retailer Shopping.com for $220 million in stock.

With the acquisition, Compaq will incorporate Shopping.com's services into AltaVista to further beef up its e-commerce strategy. For example, if a user conducts a search on AltaVista, the results also will provide a link toward the purchase of relevant products, according to Compaq senior vice president Rod Schrock. Though there will be a link to Shopping.com from the AltaVista site, it won't always be apparent whether a user is buying from Shopping.com or completing a transaction through AltaVista.

"The Internet is really quickly becoming a transaction medium as well as a content medium," Schrock said in an interview with CNET News.com. "We want to make AltaVista the leading guide for both information and e-commerce on the Internet."

A Compaq spokesman added that, under Compaq's consumer products division, which is headed by Schrock, AltaVista will become an additional feature on its "Internet PC" initiative. This will allow Compaq users to access AltaVista or Shopping.com e-commerce services simply by pressing a single button on the PC keyboard.

"AltaVista is a key part of that overall Internet strategy," said the spokesman.

However, analysts and observers remain skeptical about Compaq's intentions for AltaVista. Many wonder whether Compaq's efforts now are too little and too late to catch up with the portal heavyweights, especially in light of the apparent evolution taking place in that sector as traditional media companies such as Disney and NBC jump into the fray through joint projects and acquisitions.

Since the company completed its acquisition of Digital Equipment, many analysts have wondered whether Compaq has the resources and expertise to run an Internet media company. Many also speculated that the computing giant would sell the service after polishing it up by adding more portal features.

Recently, Frank Gens, an analyst with market research firm International Data Corporation, predicted in his 1999 report that Compaq would probably sell its AltaVista stake.

However, in an indication that AltaVista was significantly ramping up its portal efforts, the site last year began to partner with content providers such as ABCNews.com, InteliHealth, and TheTrip.com, later launching a redesign that featured content organized into channels.

Building blocks for what?
And in May, Yahoo ended its two-year licensing contract for AltaVista's search engine by signing on search technology firm Inktomi. Yahoo attributed the contract's dissolution to a conflict of interest, noting that AltaVista has been stepping up efforts to pursue a portal strategy that would compete with Yahoo's.

But despite the ongoing efforts from Compaq, Forrester Research analyst Chris Charron said the computer giant's efforts have been slow at best--underscoring the vagueness of Compaq's AltaVista strategy.

"I think the AltaVista train stalled over the past six months while Compaq was figuring out what to do with it," he said. "That uncertainty about AltaVista's future certainly had an impact on AltaVista employees and potential partners, and especially its users. With that uncertainty, partners are less apt to do business where there is so much fluidity in the people and the vision."

Charron added that AltaVista once competed with Yahoo and Excite, back when both were merely search engines. Due to stagnation, however, Yahoo, Excite, and other portals have taken an astounding lead in audience growth and revenue.

"At one point, AltaVista was an underdog and a competitor in the space," he said. "But right now it's fallen too far behind to compete with the Go Networks and Yahoos of the world."

The need for media savvy?
As a solution to competing with the heavyweights, Charron said AltaVista is in need of media-experienced management, similar to the core management teams within other portals.

"As a signal that they could take [AltaVista] to another level, they should hire some stronger managers and give them the independence and cash to make this a strong media company, and not just an appendage to the Compaq PC business," Charron said.

Currently the site's day-to-day operations are managed by Compaq vice president Kurt Losert, who reports to Schrock. Losert replaced Bob Hult, formerly AltaVista general manager under Digital, who left the company after the close of the acquisition in June, according to the spokesman.

Nevertheless, surviving under Compaq's wing has its advantages. Despite doubts over Compaq's ability to run a Web portal, some analysts disagree with the notion that media types are the necessary means to an end.

"I don't think the differentiation between a hardware company and an Internet media company is unrealistically dramatic or unrealistically wide," said Anya Sacharow, an analyst at Jupiter Communications. "I think there's a possibility for those two cultures and businesses to understand each other."

News.com's Sandeep Junnarkar contributed to this report.