Lycos-USA: No e-commerce home run

One of the key aspects of Lycos' complex merger agreement with USA Networks was the potential selling power, over both new and old media, of the combined company.
Written by Matthew Broersma, Contributor

But potential is one thing, and showing results will be quite another in this case, industry observers said. Lycos (Nasdaq:LCOS) CEO Bob Davis suggested giants such as 've="" created="" a="" framework="" for="" becoming="" the="" largest="" e-commerce="" player="" anywhere,="" ever."="" "="">

Industry analysts didn't see it as such a sure shot, however. "The question is whether they'll be able to come up quickly enough to catch heavyweights like Disney and the telecommunications companies," said Jack Staff, chief economist at Zona Research, referring to the other big powers that have recently bought into the Internet landscape. "We think Lycos has an uphill battle on their hands, and that could be why their stock hasn't been doing so well today."

The theory behind the deal is simple: USA Networks has holdings whose expertise is selling, foremost among them, Ticketmaster Online-CitySearch (Nasdaq:TMCS) and the Home Shopping Network. Lycos has a large audience of loyal online users, but has been needing a boost in the e-commerce arena. Put the two together, and it could be a formidable retail and marketing network encompassing telephone, television and Internet services.

But the reality could be more complicated. While Ticketmaster could realise an immediate synergy with the audiences of Lycos Network, Home Shopping Network viewers might not be as likely to go on the Internet, and Lycos users might not be interested in buying the typical HSN merchandise. "HSN ... has a lower demographic, they're not as online as other retailers," said analyst Kate Delhagen at Forrester Research. "The demographics are a mismatch, and it could take some time for them to catch up."

Sales expertise is one of the assets Lycos is looking for out of the deal, but transferring that resource might prove more elusive than expected, Delhagen said. The people at USA have the "dynamic selling mindset ... those guys understand how to program for live television and give people a sense of urgency, get that impulse buy," Delhagen said. "If they bring that DNA to Lycos, it will become a more effective selling environment. But it depends on how the integration goes ... we'll see in six or 12 or 18 months."

The most valuable part of the deal from an e-commerce point of view could be Ticketmaster and HSN's infrastructure. The cable network's back-end order fulfilment and delivery system could give Lycos an edge over online competitors.

In addition, expanding to off-line marketing outlets should be a boost for Lycos' e-commerce attempts, said Peter Krasilovsky, an analyst at The Kelsey Group e-commerce consultancy. "It's like when AOL purchased MovieFone (the telephone movie ticket agency)," Krasilovsky said.

"All the e-commerce players are looking to go beyond the little computer screen" and extend their marketing to other media, he said. Ticketmaster, for example, could be an e-commerce platform in its own right, Krasilovsky said.

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