Yahoo bets #30m on Netscape guide deal
James Harding reports from the Hambrecht & Quist Technology conference held in San Francisco last week
Internet search and content company Yahoo has gambled $30 million and its future developments after entering a co-operative deal with Netscape to launch a guide product.
The Netscape Guide, which helps users of the Navigator browser to surf the Net efficiently, is vital to Yahoo?s future success. The company has not made a profit since its 1995 flotation on the Nasdaq exchange and reported a 1996 turnover of $19 million.
But at the Hambrecht & Quist Technology conference in San Francisco last week, Tim Koogle, Yahoo president and CEO, revealed that the company paid $5 million to Netscape for the first year of the deal. The figure will rise to $10 million ? paid from advertising revenue ? in the second year and $15 million in the third, assuming Netscape provides an agreed amount of internet traffic to Yahoo sites.
Koogle said: ?The launch of the Netscape Guide by Yahoo means more targeted internet users and more ad opportunities. Ads are our revenue ? we count ourselves as a media company like radio or TV broadcasters.? The guide points surfers who hit Netscape?s home page to selected information pages.
Koogle quoted figures from market watcher Forrester Research that claimed the Web advertising market will be worth $2.78 billion by 1999, up from this year?s figure of $400 million. Yahoo will charge two cents per view of each page ? it has about 300 million views per day which means 20 per cent of its pages are adverts.
Last month, Yahoo set up a local, customised version of its software, Yahoo Europe. IBM recently signed to advertise worldwide on Yahoo with different, tailored ads in each country. Koogle claimed Yahoo will soon sell ads to companies outside the industry.
Yahoo first revealed its alliance with Netscape last month. The move comes as rival search engine companies ? Excite and Infoseek ? both announced plans to differentiate their offerings in the market (PC Dealer, 2 April).
Madge blames direct sales for poor results
Networking specialist Madge Networks has blamed direct sales for its poor sales performance last year as chairman and CEO Robert Madge insisted that the company will return to growth within six months.
The company began selling Lan systems products directly but abandoned that policy last year when it saw its damaging effect on Var sales.
Madge said: ?We?ve had a dismal Q1. Our recent results have had a dramatic effect but we?ll show our business is better than that.?
He told delegates at the conference that the strategy to return Madge to significant profit revolves around a programme of cost cutting, indirect-only sales and pumping more money into R&D as well as supporting its channel partners.
?During the next quarter we?re getting our house in order,? he admitted. ?Profit comes after that.?
Madge broke even on turnover of $482.1 million in 1996, after making $1 million profit on turnover of $427.4 million in 1995. The company?s main businesses are in Token Ring adaptor cards and Lan systems.
?Now we are shipping adaptors for growth and volume to grow market share. Shared media is a flat to declining market ? Lan switching is the growth segment,? Madge said.
Madge?s future will partly depend on the voice and video processing market, as it plans to introduce products in this sector along with its stackable Ethernet switching product, Visage.
Cabletron CEO slams trend for consolidation in networking
Cabletron attempted to distance itself from the scramble to buy up companies in the net- working industry, as CEO Bob Levine called the strategy ?futile?.
Speaking at the conference, Levine slammed 3Com?s acquisition of US Robotics, and the formation of Bay Networks from Wellfleet and Synoptics.
?We have grown with core technology. We made four acquisitions of about $150 million but we would rather develop the technology ourselves,? he said.
But despite his damning views on the consolidation in networking, he refused to rule out a large acquisition. ?I would never say never,? he admitted.
He said 3Com?s purchase puts it in the commodity product business. ?I?m not going to play in that market. You need two different management products to run its products.? Levine was also damning of Cisco?s products, claiming there was scope for value add.
Cabletron, which reported a turnover of $1.4 billion in its financial year to February, has better consistency, he said. ?We have the same people, we own our manufacturing and will not make our products obsolete by buying others,? he argued. ?Customers are loyal to us.?