To try and cash in on the popularity of its World Wide Web site, Netscape Communications has signed a deal with America Online that in effect turns the commercial online service into an advertising agency.
Starting in the next few weeks, Netscape will reduce its advertising rates to encourage more purchases and sales representatives for the number one online service will also sell advertising banners on Netscape's Web site. Under its current rates, Netscape guarantees a banner ad will get 1 million impressions -- visits to the page where the ad is located -- a month for approximately $20,000.
Netscape is ending end its relationship with DoubleClick, an advertising agency in New York with about 50 Web clients. Netscape will now contract instead with AOL for its consumer advertising and with Network 1.0, owned by Softbank, for business-to-business advertising.
Financial terms of the deal were not disclosed, but ad sales representatives will receive an average of 15 percent of the revenue they generate, according to one advertising executive. One analyst quoted in a Reuters report claimed the deal could bring AOL $30 to $40 million dollars in 1997.
"This puts AOL in a position where they are the gatekeeper to the Internet for the advertising community," said analyst Keith Benjamin of Robertson, Stephens & Company. "If you now count the number of pages AOL has for sale, it dwarfs anybody. They have marketing savvy second to none, and Netscape recognizes that clearly."
To bolster its new ad sales services, AOL will announce as early as next week a deal with A.C. Nielsen & Co. to guarantee ad impressions for its clients, according to a report in Interactive Week Digital. AOL officials would not confirm the report, but agreed that it will be important to rely on a third-party track the activities of AOL's six million subscribers.
Netscape's site, which according to the company receives over 70 million hits a day, is considered a prime advertising space because it often serves as the home page for users of its Navigator browser and because many go there to download the latest versions of the Navigator software. Navigator dominates 84 percent of the browser market, according to a recent survey by the research group Dataquest.