Where is Infoseek going?

The alliance between Disney and the portal firm is raising questions about the future of the portal and the firms' management structure.

Jim Hu Staff Writer, CNET News.com
Jim Hu
covers home broadband services and the Net's portal giants.
Jim Hu
4 min read
Does next year's launch of the Walt Disney Company's Go Network signal the beginning of the end for Infoseek?

On paper, the Disney-Infoseek alliance makes sense. Disney wants to be as much an entertainment superpower online as it is off, and Infoseek can offer some portal expertise and technology toward that end. Infoseek, which in general has lagged behind bigger portal players such as Yahoo and Excite, could use Disney's abundant marketing muscle and brand recognition to get the boost it needs.

But internal power struggles and a certain wariness on Wall Street's part about the deal have brought out questions about the strategy itself and its inner workings.

So far, Disney has indicated that it intends to maintain the Infoseek brand as a search and directory engine.

However, Infoseek executives have offered more vague--and sometimes downright contradictory--predictions of the portal's future. Chairman and founder Steve Kirsch told CNET News.com that it's only a matter of time before the Infoseek portal is overshadowed by Go.

"There will be a transition from Infoseek as the main brand to Go as the main brand," he said. "The timing has not yet been determined.

"It's a question of bandwidth," Kirsch added. "Trying to promote two brands is more [difficult] than promoting a new brand."

Other Infoseek executives have not been as definitive. "There are a number of very loyal customers to Infoseek, and we're not foolish," said Barak Berkowitz, the firm's senior vice president and portal site general manager.

"When [Go] is launched in November you will see two portals up," added Berkowitz, referring to the site's beta period.

Since the deal was announced in June, when Disney purchased 43 percent of Infoseek and handed over ownership of Starwave, Infoseek has touted the strength of Disney's brand and promotional channels as the necessary push it needs to become a major player in the portal race.

But the lackluster stock performance of both companies since the agreement was inked reflects analysts' concern over the enormous expense in building a new portal. Many wonder whether building the portal from scratch would make more sense than simply beefing up the existing one Infoseek offers.

"The general feeling is somewhat lukewarm," said Alan Braverman, an analyst at Deutsche Bank Securities. "It hasn't really been flushed out in terms of how the deal is ultimately structured and how the benefits are going to shake down in terms of Infoseek."

Daniel King, an analyst at LaSalle St. Securities, noted: "If Infoseek transitions to simply a search engine without maintaining the quality of a portal or a hub, then I think that would necessitate a serious downgrade of the stock, in part because we won't know what kind of revenue Go would generate."

However, he added, "If Infoseek were to fold by 2000 because Go was ranked in the top five and was generating significant advertising revenues, then it would make sense."

King currently holds Infoseek at a "speculative neutral" rating. "It appears to me that revenue growth is not amazing, Web traffic has been somewhat flat, and although the Disney deal has great potential, I don't want to anticipate it too much," he added.

Disney has suffered some uncharacteristic public blows in its quest for Net power. For one, its Net division seems to be hemhorraging executives, and its many strategic Net deals have done little or nothing to boost its stock. Other firms, by contrast, have enjoyed tremendous or renewed stock performance with the announcement of Net deals.

The uncertain future management structure within the Go Network is causing some alarm on Wall Street as well. So far, the management of Go will mainly rest in the hands of Jake Winebaum, the chairman of Disney's Buena Vista Internet Group, and Harry Motro, chief executive of Infoseek, according to Infoseek's Kirsch.

Kirsch noted that Patrick Naughton, who served as chief technology officer at Starwave, and Berkowitz will follow. They will be responsible for running technology and marketing efforts, respectively.

Kirsch added that former Starwave chief executive Mike Slade has yet to be incorporated into the Go Network's management structure, bringing into question Slade's future with Go.

But it may be difficult to merge three essentially different corporate cultures--Disney, Infoseek, and Starwave--into one management structure. So far, the intermixing of sales forces has been a focal point of friction, especially between the Starwave and Infoseek camps, according to analyst Braverman.

"What they had at Starwave was a very focused sales force and they had a good niche online," Braverman said. "I really think that's where the clash is coming from."

Nonetheless, the future of Infoseek and its efforts to build out Go under Disney will become clearer once it releases its proxy statement from the Securities and Exchange Commission. The statement then will be sent to shareholders for approval of the deal.