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Excite at a crossroads, CEO says

In light of the AOL-Netscape deal and an atmosphere of consolidation in the Net space, the company's chief sizes up the portal's options going forward.

Now that America Online is acquiring Netscape Communications, many observers of the technology industry are wondering what's in store for Excite.

With the consolidation of two giants in the space for Web search directories, or "portals," analysts foresee more monumental deals on the horizon, and Excite isn't likely to get left behind.

While established Portalopoly players such as Yahoo and Microsoft's own MSN.com have maintained confidence in their ability to remain autonomous, Web portals such as Lycos and Excite could be standing at a crossroads--and could choose to shake hands with a competitor or another media conglomerate hungry for an expanded Web presence.

Excite chief executive George Bell says he is pleased with the options that have opened up to his company in light of the blockbuster AOL-Netscape combination. In fact, Excite plays a central role in that deal, since it has interests in both companies: Earlier this year, Excite agreed to pay Netscape $70 million to power the company's search engine, provide it with content, and sell advertising on its Netcenter portal. Excite also powers the search engine for AOL.com's NetFind.

According to Bell, the proverbial ball is now squarely in Excite's court. The company plans to watch and wait until the AOL-Netscape deal closes before making any definitive moves, but eventually it will be forced to make a difficult choice. On one hand, it can cut its losses by walking away from the Netcenter deal--taking a $40 million refund on what had turned out to be a precarious partnership. Or, it can stick with its existing relationship in the hopes that AOL can ramp up marketing for Netcenter--an arrangement that ultimately would benefit Excite.

CNET News.com caught up with Bell to see how he plans to steer through the consolidating Internet landscape, which seems to be rapidly closing in on Excite:

NEWS.COM: How involved were you in the AOL-Netscape deal? Was Excite in any way a catalyst in the discussions, or at least a factor in them in any way?

Bell: Because AOL owns 9 percent of us, and because I've got perhaps the closest strategic relationship with Netscape of any of the portal companies, I was in and out of those discussions in various parts over the last couple of months.

Is there an advantage in maintaining your relationship with Netcenter?

There are some advantages strategically to staying in the deal--the brand exposure off of improved Netscape browser share is one; incremental revenues off of improved Netscape browser share is two; and incremental registration of browser distribution through AOL properties is three.

But the good part about all of this is that Excite doesn't need to rush to make a decision as to whether to stay or go in the agreement because it doesn't have to notify AOL of its intention to do so until the AOL-Netscape deal closes--and that may be 100 days away, minimum.

So we don't need to do anything right now. What we need to do is watch closely AOL's words and its behavior with regard to its pushing the Netscape browser to new parts of its user base as a preferred browser. Any improved share for the Netscape browser is rocket fuel for Excite, since it will drive more impressions to Netcenter.

If you look at the portal landscape in general, do you foresee future instances of consolidation? Is this the end, or will the space keep consolidating more and more until there's a handful--or maybe less--of established players?

I think you're going to see more consolidation. You've got about 75 Internet companies out there. It just can't make sense that all of those companies would remain viable, independent businesses.

I think the AOL-Netscape deal underscores two parts of the consolidation scenario: One is it's going to happen faster than people think; and two is that even big companies will be consolidated with other big companies. It's not just going to be the smaller fish in the pond.

One of the sideshows to the Netscape-AOL merger is the notion that lots of other companies, including Excite, will want to look and reassess what they think are the right combinations in the marketplace, through perhaps acquisitions and consolidations of people below us in the food chain.

So you're saying that you want to look down--not necessarily up--for consolidation?

We're looking everywhere.

Is it essential now to be partnering with someone that has very strong offline promotion, such as a media company, or a company that has a lot of strong offline marketing clout?

I thought that the power of the media company alliances with portals, in the long term, probably will represent some solid combinations. But I think in the short term...it's not at all very clear to me.

If you get $100 million of somebody's media, I'm not sure that it represents a breakthrough strategy for anybody. AOL will spend $400 million on media in 1999, and Microsoft will spend double that. The traditional media notion of Time Warner, Disney, and others riding to your rescue as your white knight seems a little inflated at this point. But in the combinations that you've seen so far--Infoseek-Disney, and Snap-NBC--in the wake of AOL-Netscape, those two deals look to me virtually irrelevant. They seem small relative to the power of the Netscape-AOL combination, in terms of the impact on the Internet space and on the millions of users who either come to Netscape or AOL.

I just don't think that the time is right yet for any take-out strategies or control strategies to be in place for media companies, because I think the Web still has a lot of growth to get under its belt. And it's best left alone while trying to get through that.

A company like Lycos has looked down, and it's acquired a lot of smaller companies to expand its reach. As you mentioned earlier, that was something Excite was doing for a while, too. It seems like that has slowed down at your company. Is there any reason for that?

I don't believe we've slowed down much. We've acquired MatchLogic, Classifieds2000, and Throw this year. We also are doing, when possible, smaller acquisitions that we think are strategically important but that we don't have any obligations to tell the public about if they represent less than 10 percent of our market cap. Our acquisition pace is not as feverish as it was in 1996 and 1997, and on a relative basis to our own acquisition pace, it has slowed a little bit in 1998. But I actually think it slowed numerically to our peer groups.