Yahoo, MCI strike content deal

Yahoo is getting into the Net access business and competing with AOL and others through a new partnership with MCI Internet.

4 min read
Yahoo (YHOO)--the most visited site on the Web by many accounts--is getting into the Net access business today through a partnership with MCI Internet.

Dubbed Yahoo Online, the service will roll out later this quarter powered by MCI, with Yahoo's content aggregation. The pricing hasn't been announced yet, but Yahoo Online subscribers will access the Net through a customized home page with links to its existing services such as personal financial portfolios, news headlines, and city entertainment listings.

Under the exclusive deal, MCI will provide the network backbone and customer service. MCI's own Net access, however, will not be branded by Yahoo.

"Yahoo will continue to form distribution alliances and work with other ISPs. But as it pertains to Yahoo Online, there will only be one Yahoo Online, powered by MCI Internet," Jeff Mallett, chief operating officer of Yahoo, said today.

"Per month we have 26 million unique adult visitors from the United States, many of whom come to the site from work and school. We will package this service for them," he added. "We would like this to be one of the services in top of mind for new consumers who are coming to the Web. We will integrate this offer into Yahoo's offline marketing as well as operating throughout our Web network."

The launch of Yahoo Online marks the latest attempt to weaken America Online's grip on consumers who are used to having their online connections bundled with high-quality content on the Net. Yahoo Online plans to go head to head with AOL as well as a handful of other services that aim to be a starting point for Net users by pointing to quality online content and providing tutorials for new surfers.

For example, PC maker Acer America Corporation today launched InternetACE, a package that includes a tutorial, Web browser, content directory, and Net access service provided by GTE Internetworking, for $19.95 per month.

Another service going after AOL is Snap Online, owned by CNET (publisher of NEWS.COM), which aggregates online content and develops Snap-branded Net start-up kits for ISPs. Snap Online has partnered with more than 35 ISPs, including MCI, AT&T WorldNet, and Sprint Internet Passport. Snap Online also is the default home page for Sprint's customers.

Yahoo Online will not affect Snap Online's deal with MCI, which links to Snap Online's home page and will feature its tutorial on the MCI Internet start-up CD-ROM, said Halsey Minor, CNET's chairman and chief executive. He doesn't see Yahoo Online as a competitor to Snap Online, either.

"This announcement is not about Yahoo becoming MCI's default online service," he said. "We're still focusing on being the default service for ISPs, PC manufacturers, and other marketers."

But analysts are saying that despite the differences in packaging and services, AOL, Snap Online, and the soon-to-come Yahoo Online may appear the same to consumers.

"We have this market developing for competitors to AOL, and here we just have one more," said Kate Delhagen, analyst for Forrester Research. "The good news for consumers is that all this competition will make their online experience better."

Although numerous ISPs may partner with a service such as Snap Online, Net users who know and love Yahoo may choose to buy the new Net access service based on brand awareness alone.

"Everyone is fighting to be the start page. If you can get people to come to you first, provide them with much of what they need, and keep them there for as long as possible, then there is no reason for them to go somewhere else," said Andrea Williams, an analyst for Volpe Brown Whelan & Company. "This sounds like a way for Yahoo to leverage its brand."

To harness Net access customers in the growing competitive market, ISPs now have to offer content and e-commerce capabilities, on top of reliable dial-up service and customer support, according to analysts. Yahoo Online makes sense, many say, as the online directory already offers free email, and content. The deal also is good for MCI Internet, which is using a slew of new partnerships to capture more Net users.

Still, even for a brand such as Yahoo, the biggest feat is getting consumers to choose its service over other online services. "The No. 1 challenge is awareness," Delhagen said.

Jill Frankle, a senior analyst for International Data Corporation, says Yahoo and MCI's partnership is part of an overall trend away from proprietary services--the ground upon which AOL was founded. AOL also has concentrated its efforts of late on beefing up its Web presence.

"It's very indicative of how business models on the Net have changed in the last year," Frankle said. "What Yahoo, AOL, and Microsoft Network have built is distribution of content. I think we can very much expect to see more deals like this. At the same time, AOL has moved a lot of its content to [the Web]."

Others say, however, it will be a long time before Yahoo Online competes with AOL.

"It takes more than announcing a partnership with MCI to make yourself competitive with AOL," Williams said. "Yahoo has a strong brand on the Web, but this doesn't quite compare with AOL yet."

Yahoo's stock closed at 62-1/2 today, up 5/8 in NASDAQ trading.