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Web Portal Lycos To Be Sold for $105 Million

By Keith Regan E-Commerce Times ECT News Network
Aug 2, 2004 9:46 AM PT

Terra Lycos today said it will sell U.S.-based Web portal Lycos, which it bought just four years ago in a deal then valued at more than US$7 billion, to South Korea's largest Internet company for $105 million.

Web Portal Lycos To Be Sold for $105 Million

Lycos, which ranks in the bottom of the top-10 most heavily visited sites in the U.S., will become the first American-based service for South Korea-based Daum, one of that country's top technology firms.

Spain-based Terra Lycos will retain its ownership stakes in Lycos Europe and Terra Networks USA. The parent company said Lycos accounted for about 16 percent of its 2003 earnings and that the sale will lower profits this year.

The complex deal was valued at around $545 million, but because the assets that Terra will retain are valued at more than $430 million, the total premium for the deal is closer to $105 million. By comparison, Lycos was sold to Terra Lycos early in 2000 for a deal that was originally worth around $12 billion in stock. By the time the deal wended its way through regulatory hurdles, the total value dropped to around $7 billion.

Back of the Pack

Terra Lycos, which had reportedly been shopping Lycos for as long as a year, said it wanted to focus on its strength in Spanish-language markets in Europe and elsewhere. Shares of Terra were down about 1 percent by midday today, to $5.86.

For its part, Daum did not immediately disclose its specific plans for Lycos, but the property gives the company a foothold in the lower tier of search and portal sites. Daum is Korea's version of Yahoo, a diversified portal that gets half of its revenue from ads and the rest from a host of paid Web services.

"The buyout will provide a springboard for our company to venture into the U.S. Internet market and become a global player," Daum said in a statement. The dominant Web service in South Korea, Daum is also about to launch a joint operation in Japan that will be its first overseas effort.

Search Engine

Lycos, which had risen to prominence at the end of the dot-com boom on the strength of a massive advertising and branding campaign, now ranks well behind its competitors.

According to comScore Media Metrix, Lycos ranked seventh among U.S. Web properties in June, drawing about 37 million unique visitors, down nearly 30 percent compared to the same month a year ago. By comparison, the top three properties -– Yahoo, MSN and Time Warner/AOL –- each drew well over 100 million visitors.

ComScore spokesman Graham Mudd told the E-Commerce Times that in terms of search, Lycos ranked eighth among U.S. properties, controlling less than 1 percent of the total search volume of the top 25 search engines during the month of May. And though Lycos ranks as the fourth most heavily trafficked portal in the U.S., it drew less than half the visitors of third-ranked AOL during May.

The portal also boasts fewer than 200,000 registered users, however, as compared to 100 million for MSN, with the majority of those signed up for MSN's Hotmail service.

Though it lags well behind rivals, Lycos has attempted to remain competitive on several fronts. It recently rolled out an enhanced Web-based e-mail service. Lycos is ranked seventh in the United States in terms of site visits and has about 170,000 paid users, according to data provided by Daum.

Plenty to Go Around

Forrester Research analyst Charlene Li said there remains room for niche players such as Lycos, especially since at times there has been more demand than space for interactive advertising on the networks of Google and others.

"Depending on whom an advertiser wants to reach, there might be good reasons to advertise on one of the smaller portals or search networks," Li told the E-Commerce Times.

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