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Infoseek's Netscape dependency

Infoseek continues to negotiate its contract with Netscape, despite the fact that its page views sourced from Netscape traffic have fallen dramatically

Infoseek (SEEK) said today that page views sourced from Netscape's (NSCP) Web site traffic fell to 27 percent in December, from 44 percent a year earlier. Nevertheless, the company said it continues to negotiate with Netscape about renewing this key contract, which expires on April 30.

These details, disclosed in a filing with the Securities and Exchange Commission, show the predicament faced by search engines such as Infoseek: They remain highly dependent on Netscape to keep generating traffic, despite a drop-off in last year's levels for the site's traffic. Netscape remains the dominant browser provider, although it is losing share to Microsoft's Internet Explorer. And Netscape browsers have "netscape.com" as their default home page.

As reported, Netscape is reviewing its Web site strategy and exploring its options--including the possibility of decreasing the number of relationships it has with non-exclusive search engine providers, such as Infoseek. This could hurt some of these search-engine companies.

"Although [Infoseek] is currently in discussions with Netscape about renewing the agreement, there can be no assurance that Netscape will be willing to renew the agreement with the company on commercially equivalent terms or on other terms that may be satisfactory," Infoseek said in its SEC filing. "The failure to renew the Netscape agreement would result, at least in the short term, in a material reduction in traffic to the Infoseek Web site."

Adding to the pressure is a sharp run-up in search-engine stocks, fueled by lofty expectations on Wall Street. Infoseek is closing near to its 52-week high, as are many of its competitors. Yahoo stock also rose today, on the expected announcement of its alliance with MCI, called Yahoo Online.

"In 1996 and 1997, approximately 65 percent and 36 percent, respectively, of all page views served on the Infoseek Service came from traffic attributable to the Netscape Web page," the SEC filing said. The current agreement with Netscape calls for the company to pay an aggregate of $12.5 million in cash and reciprocal advertising ($10 million of it cash) over the term of the pact.

Infoseek has been a featured provider of navigational services on Netscape's Web page since March 1995.

Excite, Lycos, and Yahoo also are non-exclusive premier providers of navigational services on the Netscape Web page.

As reported last Wednesday, Netscape stepped up its competition with Yahoo, Excite, and other "portal" Internet sites with the launch of its Netcenter community services. Since the site's reconfiguration and launch last September, Netscape has moved aggressively to add features to the site. Less than 10 percent of Infoseek's traffic is sourced from Microsoft, but the search-engine company expects competition from Redmond. For example, the filing states, Microsoft could "tightly integrate" its so-called Yukon search services into the Microsoft operating system, the Internet Explorer browser, and other software applications. It also could be promoted within the Microsoft Network or other Microsoft-affiliated end-user services, such as MSNBC or WebTV Networks, a powerful combination.

Reporter Alex Lash contributed to this report.