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AOL, Homestore ink $200 million deal

The online giant signs a five-year deal with the e-commerce firm, even as questions emerge about the viability of such blockbuster marketing and distribution deals.

    America Online today signed a five-year deal worth more than $200 million with e-commerce firm Homestore.com, even as questions emerge about the viability of such blockbuster marketing and distribution deals.

    Homestore, an Internet real estate network, will provide real estate content to AOL, the largest online service. The deal comes less than a week after AOL was forced to restructure the $89 million megadeal it signed last year with online health site DrKoop.com. The health information site has burned through nearly all its cash and seen its stock drop to the low single digits, which made it difficult to meet its marketing obligations. Last week AOL took an equity stake in the company as compensation.

    Other e-commerce and content firms are facing similar dwindling cash reserves, forcing them to re-evaluate their marketing and branding strategies.

    Homestore has also seen its stock slide toward all time lows lately. The stock closed Friday up $1.63, or almost 10 percent, at $18.25. It has traded as high as $138 during the past 52 weeks.

    Last week, Homestore said the Justice Department has requested information from the company about its business in the online real estate sector.

    Under the terms of the agreement, AOL will receive about 3.9 million shares of Homestore common stock and $20 million in cash. Homestore is also required to meet certain performance targets through the terms of the agreement.

    With the expanded alliance, Homestore will become the exclusive national provider of professional home and moving services in home-related areas across all AOL properties, including CompuServe, Netscape Netcenter and Digital City. Today's agreement builds on a 1998 deal between Homestore and AOL.