Netscape Communications Corp., the No. 1 seller of Web advertising and the fifth largest buyer of Web ads, has built its dynasty with help from barter deals.
The company last week renewed contracts--all including barter components--with four search engines: Yahoo!, Excite, Infoseek Corp. and Lycos.
Unlike last year's deals, in which search engines agreed to pay $5 million each to be "Premier Providers" on the Search area of Netscape, each engine this year is paying on a cost-per-thousand impression basis. However, the overall investment should be fairly equivalent, said Jennifer Bailey, VP-electronic marketing at Netscape.
Ms. Bailey said the search engine contracts "are heavily weighted on the `real cash' side" but "do include barter." Most of Netscape's advertising on search engine sites, in fact, comes from barter agreements, she added.
BIG SPENDING ON SEARCH
Netscape last year bought $5.7 million in Web ads, estimates Jupiter Communications, with approximately $3.4 million, or 60%, of that expenditure, going toward six search engines.
Since Jupiter can't determine the amount of barter in the advertising it measures, it's possible that much of the $3.4 million in reported spending was in fact barter.
Although Netscape is Excite's No. 1 advertiser, placing an estimated $506,000 there last year, according to Jupiter, the company spends little cash on the ads.
"It's about the entrepreneurial nature of the Web and forming strategic business relationships that make sense," said Brett Bullington, Excite exec VP. "Netscape usually constructs barter deals that include components like technology, ad avails and some cash."
Bartered ads even show up as revenue for Excite. The company and Magellan, a search site it bought, agreed to pay Netscape $10 million for premier provider status But Netscape cut the fee by $3 million in return for banner ads on Excite's sites. Excite included that $3 million in its revenues, according to a Securities & Exchange Commission filing last fall.
There are also barter components in Yahoo's deal to create Netscape Guide by Yahoo!, replacing the Destinations page. Yahoo! will pay $5 million for the right to program and sell advertising on the guide.
Contributing: Chuck Ross
Copyright March 1997, Crain Communications Inc.