HotBot is heart of Lycos deal

Lycos knows that the secret to success is reach. Because with reach, there's revenue.

That's why search engine HotBot is the crown jewel for Lycos in its planned $83 million acquisition of Wired Digital.

The move signifies another step in Lycos's overall strategy to become a multibranded network of Web properties. In addition to HotBot--which has garnered significant respect and dedicated usage among Web veterans--Lycos incorporates Wired's content-oriented sites, including Wired News, HotWired, Web Monkey, and e-zine Suck.

Those sites join a number of other properties to be incorporated into the Lycos network, including Web community builder Tripod, free Web email and directory service WhoWhere--which in itself encompases a number of sites including home page builder Angelfire.

A number of factors made HotBot an object of Lycos's desire. For one thing, it has a core audience of tech-savvy Web veterans with a clear demographic breakdown of users, which makes it easier to sell advertising. And, with more marketing dollars behind it from Lycos, HotBot has potential for audience growth, as search directories are still some of the most widely-visited sites on the Web.

Lycos's attraction to HotBot reflects its ongoing strategy to expand into a number of sites and sell advertisers banner packages across it entire network. Lycos wants to boost its audience numbers and offer advertisers a package to buy banner ads across its entire network of sites geared towards different viewer tastes.

Lycos also can expand its commerce deals with vendors such as Barnes & Noble and CDnow. After acquiring community builder Tripod in February, Lycos was able to reap millions more by extending commerce deals to include Tripod, said Bo Peabody, vice president of network strategy for Lycos, and president of Tripod business unit.

That is exactly what Peabody intends for HotBot.

For the past few weeks, HotBot has been preparing itself for its initiative to attract a more mainstream audience. Just yesterday, HotBot launched a television and radion advertising campaign, estimated at $10 to $15 million, to boost traffic on its site and increase brand awareness. And last week, HotBot underwent a redesign, sporting a more flamboyant neon green and an altered interface.

Lycos's move into the HotBot market demographic may be a bonus, analysts say. "It does broaden their reach to the higher end and to the more Web-savvy person where Lycos may not have had as much reach," said David Simons, managing director of Digital Video Investments.

However, alongside with the search engine, the $83 million price tag includes a number of content sites as part of the package, including Wired News.

Portals have traditionally shied away from creating their own content, opting instead to strike distribution deals with outside providers. For example, many maintain news channels featuring articles written by wire services such as Reuters or the Associated Press.

Analysts, however, wonder whether Lycos will be as enthusiastic about promoting Wired's other content offerings as it is about boosting HotBot. "[Content] represents a nice asset but, knowing Lycos, it's not their style to go for that content," said Abhishek Gami, an analyst at William Blair & Company. "I wouldn't be surprised to see Lycos not grow it as quickly."

Others echoed Gami's speculation, saying that it may make more sense to focus on the things that yield the most returns.

"Other content assets could go away and the focus could go to the easy-to-monetize HotBot traffic and building the Wired News brand," said Patrick Keane, an analyst at Jupiter Communications

Bo Peabody, though, said that while HotBot was the main focus of the deal, the lifeline of Wired's other sites depend on how well they rein in revenues.

"The plan to expand content as long as they keep growing," he said. "If traffic is growing, why kill it?"