Lycos: WhoWhere? purchase shows 'community' is king

In the furious competition among a shrinking number of Web wannabes, one thing will separate the victors from the vanquished, according to Lycos Inc. CEO Bob Davis: Community.

In the furious competition among a shrinking number of Web wannabes, one thing will separate the victors from the vanquished, according to Lycos Inc. CEO Bob Davis: Community.

Taking his advice to heart, Davis on Tuesday announced his company's $133 million purchase of Web directory, e-mail service and community-building site WhoWhere? Inc. -- a deal that bolsters Lycos' (Nasdaq:LCOS) community-building potential and delivers more than 10 million users. Web portals that fail to exploit the Internet's interactive nature are doomed to also-ran status, Davis said during a press conference to discuss the deal.

That's because in addition to WhoWhere?'s Angelfire Web page-building community site -- which boasts 1.3 million members (and was the fastest-growing site on the Web between December 1997 and June 1998, according to a study released this week by Media Metrix) -- Lycos will inherit 9.3 million registered users of WhoWhere?'s MailCity e-mail service.

Look out, Yahoo!?
This makes Lycos more of a final destination than simply a Web entry point, and puts it squarely in competition with Web directory giant Yahoo! Inc., according to the Lycos chief executive.

"Rather than just being an entry and exit point, we're more focused on bringing people to our site and keeping them there," said Davis, citing useful services and quick avenues toward meeting and interacting with other users.

With the acquisition -- coming on the heels of Lycos' $58 million purchase of another popular community site, Tripod, in February -- company executives are taking to calling Lycos a "hub" rather than a portal, he added.

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"We're on track to become the most visited online destination in the world," Davis said. Before the WhoWhere? partnership, "you had Yahoo! at the top and maybe a couple of others" as leaders in market scale and number of unique users, he said. "This now becomes a two-horse race" between Lycos and Yahoo! (Nasdaq:YHOO), Davis said.

"Personal publishing and community is the fastest-growing category on the Web," Davis said. "Overnight, while others slept, we have dominated this category and it will be hard for the others to catch up."

Referring to the Media Metrix study, Davis said that by combining the traffic it attributes to Lycos and WhoWhere? sites, the combined company would be responsible for 31.2 percent of the Web traffic in a given 30-day period within the survey's duration.

Consolidation mania
Consolidation in the Web directory services market is nothing new. Frequent deal-making among several key players -- besides Lycos and Yahoo!, the list includes Excite Inc. (Nasdaq:XCIT), Netscape Communications Corp. (Nasdaq:NSCP) and America Online Inc. (NYSE:AOL) -- has led to a positively incestuous portal marketplace.

Indeed, WhoWhere? runs the e-mail system for Excite, one of Lycos' biggest rivals. (The future of WhoWhere?'s relationship with Excite in the wake of the Lycos purchase is uncertain, Lycos and WhoWhere? officials said in the press conference.)

It also remains unclear to what extent the WhoWhere? properties will be integrated into Lycos' sites, Davis said. But there are no plans in the works to merge the Angelfire and Tripod communities, and the companies' various e-mail services are also likely to remain as stand-alone features for the foreseeable future, he said.

Analyst skepticism
At least one analyst was skeptical of Davis' claim that the addition of the WhoWhere? users makes Lycos a serious challenger to Yahoo, which remains the traffic leader among the search-and-directory pack.

"I'm leery of adding in the raw numbers of people who registered for other sites," said Peter Krasilovsky, a new media market analyst with Arlen Communications in Bethesda, Md. As a way of measuring user loyalty to a brand, "that's highly suspect," he said. Krasilovsky noted that those users were casting their vote of confidence for WhoWhere?, not for Lycos.

But hyperbole aside, the announcement does signal positive momentum for Lycos, which did indeed embrace the personal home-page building concept ahead of its competitors, Krasilovsky said.

"You'll see more and more of these portals offering community and home page functions," he said. "The question is, will there now be a gold rush among the commerce sites to do the same thing?"


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