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Commentary: What does Lycos offer Terra Networks?

It seems likely that Terra Networks sees Lycos as a valuable foothold in the United States, which would make Terra bigger--but not necessarily better.

See news story: Analysts: Lycos bailed out while they could

By Whit Andrews

Since the outburst of consolidation among Internet portals that occurred in late 1998 and early 1999, the industry has been waiting for Lycos to merge with some company.

USA Networks sought a merger that failed in the first half of 1999. One year later, Lycos is the last of the second-tier portals without a major partner.

That seems about to change.

However, as with any merger, the combined entity that emerges from the deal should offer more value than the sum of the parts. That raises questions about Lycos' possible takeover by Telefonica's Terra Networks subsidiary.

To start with, what does the Lycos network offer? Tripod is a strong Web page host, and it has proven more astute than Yahoo's GeoCities in integrating microcommercial opportunities such as affiliate sales. Lycos' partnership with the Open Directory Project was the first among the major search engines and intelligently capped a history of the company's yearning for a scaleable hierarchical directory.

Moreover, Lycos' original shopping channel was a clever mixture of product placement and trusted shopping sites, even though its subsequent mall hasn't yet proven itself.

Mostly, however, Lycos is relatively weak as a consumer product. It has failed to set itself apart and make itself appear extraordinary except as a high-traffic center. It certainly has not achieved as much of a brand appeal and unique sensibility as Yahoo or America Online.

It seems likely that Terra sees Lycos as a valuable foothold in the United States and that it will seek to extend the commercial partnerships the portal has formed with Internet-savvy U.S. enterprises to its European and Latin American bases of power. This part of the deal would make Terra bigger--but not necessarily better.

Under the agreement, Lycos' relationship with Bertelsmann will deepen. Again, Terra will benefit, but no company has so far demonstrated that a partnership between old-media and new-media companies can offer consumers any additional Internet excitement--not AOL-Time Warner, not Snap and NBC, and certainly not Disney and Go.com.

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.