Live: Amazon Event Wednesday Probe Crashes Into Asteroid Prime Day 2: Oct. 11-12 Tesla AI Day Hurricane Ian Satellite Images Save on iPad Pro Refurbs Apple Watch Ultra Review EarthLink Internet Review
Want CNET to notify you of price drops and the latest stories?
No, thank you

Can Lycos compete without USA Networks?

With media company USA Networks reportedly considering dropping its bid for Lycos, what are the chances that Lycos will try to go the distance without merging with a major media company?

With media company USA Networks reportedly considering dropping its widely criticized bid for Lycos, what are the chances that the Internet portal will join the ranks of Yahoo and try to go the distance without merging with a television or cable company?

Lycos could try but is likely to fall on its face without the helping hand of a large media company, most analysts agreed.

At the moment, Yahoo and Lycos are the only two major Web portals standing alone. Infoseek has been absorbed by Disney under the Go Network umbrella; Excite's merger with broadband Internet service provider @Home is nearly complete; America Online gets its share of exposure on television through its relationship with CBS and also backs its Netcenter portal; and NBC today announced its expanded commitment to Snap.

Snap is a joint venture between NBC and CNET: The Computer Network, publisher of

The general perception among analysts is that Yahoo has positioned itself firmly with "sticky" applications and content that will continue to draw users again and again. They note that Yahoo has sufficiently differentiated itself from the other portals through its acquisition of Web broadcaster It also stands to gain a host of loyal users through its pending acquisition of community site GeoCities.

Although Lycos offers community through its Tripod and Angelfire properties, and it recently got into the audio content game with a Net radio play, its name just hasn't sunk into the minds of most Internet users, analysts say.

"Lycos has this collection of Web properties that really don't have terribly strong brand recognition," said James Preissler, an analyst at PaineWebber.

Lycos's stock jumped last month after Media Metrix reported that its reach leap-frogged Yahoo's in March. But analysts agreed that not only is the lead tenuous, but Yahoo also has the brand recognition to distinguish itself from the other portals who need offline partnerships to drive traffic to their Web sites.

For the moment, portals rely mainly on advertising dollars, leveraging their traffic to increase revenue. Increasingly, however, portals are turning to e-commerce as an additional revenue stream.

"For some time to come, we are going to see portals predominantly generating revenues from advertising," said Daniel King, an analyst at LaSalle Street Securities. "Later e-commerce is going to kick in, so your primary objective is to pass users on to certain vendors or to keep them on your site if it is e-commerce-enabled.

"Ultimately, there will be a point where investors care less about reach and even unique visitors per month and focus on revenues and operating profits," King added, noting that Yahoo recently reported a strong quarter. "Lycos has quite a ways to go to catch up in terms of revenue."

Lycos will be updating Wall Street on its market reach and reporting its earnings on May 18.

Analysts note that although Yahoo would be a choice acquisition for any media company, the portal's $29.9 billion market capitalization puts it out of reach for most. Lycos, on the other hand, with a market capitalization of $4.3 billion, is still within grasp. At the same time, the value of Yahoo's stock allows the company to use it as currency to acquire necessary components to help maintain its lead.

Wanted: Lycos suitors
CMGI, Lycos's biggest shareholder with a nearly 20 percent stake, has said recently that there are several options for Lycos. CMGI chief executive David Wetherell noted that CMGI or another party could make a better offer for Lycos than USA Networks.

Analysts point to the usual suspects as potential Lycos suitors, including; Microsoft, which is trying to put its Net strategy on target; and broadcasters NBC and CBS.

"Amazon could potentially do the same thing that USA Networks was planning and build a huge commerce portal," said Preissler.

But don't count USA Networks out of the mix, experts warn.

"[USA Networks' chairman, Barry] Diller, doesn't give up so easily," said David Simons, managing director of Digital Video Investments. "I would expect [Diller] to have something up his sleeve to sweeten the offer--probably not cash, but he has other assets to contribute."

Moreover, if the USA Networks deal falls through, it could present a public relations problem for Lycos.

"We have a company here that has talked to a lot of players. If no other bids materialize for them, Lycos will be known as the partner nobody wanted to dance with. That's the risk for Lycos," PaineWebber's Preissler told Bloomberg News.

Preissler noted that if shareholders were looking for a strong long-term strategy rather than a premium on the company's stock price, they would have taken the USA Networks bid, which likely would have created an e-commerce giant.

Michael Goldston, portfolio manager at Cambridge Equity Advisors, which owns Lycos shares, told Bloomberg that the company needs to focus on strengthening its stock before finding a partner.

"Lycos is going to have to find some partners eventually, but I think the key thing now is for Lycos to reestablish momentum with other Internet stocks, because the shares ran out of steam there for a while," he told Bloomberg.

The Wall Street Journal first reported that USA Networks may abandon its plans to acquire Lycos. Shares of the Internet portal surged 13.97 percent to 102 in afternoon trading. The stock fell from its 52-week high of 145.38 in February because investors felt the media company wasn't offering enough of a premium for Lycos.

Bloomberg contributed to this report.