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AOL, Netscape in portal pact

America Online and Netscape unveil a cross marketing alliance linking AOL's online city guides with Netscape's Netcenter.

America Online and Netscape Communications have unveiled a cross-marketing alliance linking AOL's online city guides with Netscape's Netcenter Web portal site.

The deal calls for Netcenter to promote AOL's Digital City, which operates community Web guides for 50 U.S. cities. Digital City will become Netcenter's Local Channel for two years, the companies said.

This is yet another example of what analysts like to call "cooptition," a combination of competition and cooperation in which companies that are rivals on one level help each other to their mutual benefit in another.

In this case, Netscape and AOL are in a heated battle to become the gateway to the Net for as many users as possible. Both are packing their home pages with news, information, and other bells and whistles in an attempt to attract loyal users.

In the end, only a few companies are expected to survive the portal battle. And while it makes sense for the companies to act as enemies, there are also instances where it is mutually beneficial to promote each other, according to Bill Bass, an analyst at Forrester Research who specializes in online city guides.

Netscape needs a localized presence on its site to compete with the likes of portal heavyweight Yahoo. But Netscape had little choice when it came to a partner, according to Bass. The only other company that has a localized service that focuses on major cities belongs to Microsoft, Netscape's sworn enemy in the browser space. Microsoft, however, only has ten cities.

And AOL, which promotes Digital City on its site, will benefit from the added traffic, Bass said.

Sites providing local content entered the business with dollar signs in their eyes. But reality has been more harsh. Digital City, for instance, has had a rough go of it, with layoffs and belt-tightening. Having another site carry its content will help AOL make deals with newspapers, which are collectively winning the local content battle, Bass said.

"They need page views, and hooking up with one of the major portal sites is a major way to get page views," Bass said.

"I think this is a good idea for the two of them. They both have a good cross-promotional opportunity," he added.

The companies will jointly sell ads on the channel and will share the revenue. Netscape will handle national advertising, while Digital City will sell local ads.

The service is expected to debut in 60 days. Netscape said it will promote its Local Channel with a local button on its home page and links throughout other areas of its service.