CMGI's Web dealmaking hits big-time

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CMGI is relaunching AltaVista and opening an all-new second portal--even as the mushrooming company creates a web of Internet advertising and marketing services. That could be trouble for DoubleClick, but that remains a big if.

CMGI this month switches on a ramped-up version of pre-IPO AltaVista, the search engine-turned-portal it bought in June from Compaq Computer Corp. The likely name is AltaVista Live.

Today, CMGI announces a second portal, MyWay.com, to provide highly personalized information, commerce and services.

FLYCAST JOINS THE LIST

Just last week, CMGI said it agreed to buy Flycast Communications Corp., which sells aggregated ad inventory across a network of Web sites, in a stock swap worth close to $700 million.

Meanwhile, CMGI and its operatives are digesting a series of acquisitions, including AdForce, AdKnowledge and 1stUp.com.

MyWay.com entirely replaces 2-year-old portal Planet Direct, including its URL. Arnold Communications, Boston, which handles ads for some CMGI arms, will develop an estimated $25 million to $35 million MyWay campaign due in November after the site launches Oct. 18.

PORTALS WILL BECOME BRANDS'

MyWay integrates AltaVista's search technology, but will cull a distinctly different audience, said Jeff Cunningham, president-Internet media at CMGI and president-CEO of MyWay.

"We believe portals will become brands," said Mr. Cunningham, a former Forbes Inc. group publisher. "And CMGI wants to be No. 1 in the portal business."

For now, CMGI is a long way from the front door of portals. AltaVista's audience ranked eighth among portals and search engines in August, according to Nielsen/Net-ratings, with Planet Direct far behind at No. 37. CMGI wants to grow the audience as it prepares for an initial public stock offering exected in January for AltaVista. MyWay will not be part of the IPO.

Evidently, CMGI wants to be No. 1 in other businesses, too. The double-portal strategy--expanding niches for consumers and creating more ways for advertisers to reach them--comes as CMGI is amassing an arsenal of companies that position it as a formidable contender among online advertising infrastructure builders, notably DoubleClick.

CMGI, headed by Chairman-CEO David Wetherell, claims nearly 50 Web-related companies, including those it operates through majority ownership or has invested in via its venture-capital affiliate, @Ventures.

Acquiring Flycast solidifies earlier speculation--confirmed by CMGI Exec VP-Marketing and Corporate Communications Bill White--that CMGI was seeking to buy another Web ad network. Another option was 24/7 Media, New York. Executives close to the situation speculated that DoubleClick is in talks to acquire 24/7 Media. Neither company would comment.

On Oct. 11, CMGI-backed Engage Technologies is expected to announce enhanced consumer-profiling across the CMGI network to help advertisers target users.

WEB AD MEGAPLAYER

CMGI, meanwhile, last month announced it plans to acquire AdForce, an ad-serving and targeting company that also operates a Web network, for $500 million in stock. CMGI also agreed in September to acquire a majority of 1stUp.com, an Internet access provider, in a stock swap deal. In September, CMGI and Engage agreed to buy AdKnowledge, an ad serving and targeting company, in another stock swap estimated at $193 million. Engage also bought I/PRO, a Web-site measurement, analysis and auditing services company, earlier this year.

MEGAPLAYER STATUS DEBATED

So it seems CMGI is becoming a consolidator of advertisers' services and, as such, could be in a position to dominate or at least be a megaplayer in online advertising services. Right?

Jeff Epstein, exec VP-mergers and acquisitions at DoubleClick, was philosophical.

"The industry is turning into Coke and Pepsi," Mr. Epstein said. "In markets like this, both companies will be very successful and very profitable, but one of us will be more successful than the other--and I think we have a big lead. We have executed well and if we continue to execute well, we will continue to be very successful."

Dave Morgan, president of Web network Real Media, wasn't so sure about CMGI's dominance or megaplayer status.

"They have always presented themselves as having a lot of synergy," said Mr. Morgan, who competes with parts of CMGI. "If all companies are so interdependent, there's potential that if that keiretsu is so tight, problems with one mean problems for the other."

CMGI uses keiretsu, a Japanese word meaning a relationship-based way of doing business, to describe its companies' cooperative approach. CMGI appears uninterested in rolling up its solutions into a one-stop shopping experience for customers.

Another issue CMGI must resolve: how to serve both buyers and sellers of online media, Mr. Morgan said. "The media marketplace depends on having a negotiated marketplace, and you can't play both sides of every transaction."

'A TRUE CORNERSTONE'

Chuck Berger, AdForce president, sees CMGI's strategy differently. "CMGI plans to take the financial success they've achieved to build themselves into a true cornerstone, well beyond being a portal of the Internet," he said. "Acquiring AltaVista is an incredibly important part of that. And with companies they have incubated, like Adsmart and Engage, or recently bought, like AdForce and AdKnowledge, they clearly have all the pieces they need to become a major player in exploiting the Internet as a very unique and positive media for advertisers and direct marketers."

Mr. Berger sees CMGI and DoubleClick becoming the lone competitors in the ad delivery, management and services space.

Not so fast, countered Chris Hansen, senior equity research analyst at Banc of America Securities.

Noting that CMGI so far has emphasized boosting portfolio companies' revenue rather than improving service, CMGI "now has the ad sales, ad serving and profiling and analytic capabilities that together are something that resembles DoubleClick's model," Mr. Hansen said.

"But in delivering integrated ad serving, targeting and sales, DoubleClick's way in the lead. They have a turnkey solution for small- to medium-sized sites." The challenge now for both, Mr. Hansen added, is convincing a large Web site such as Yahoo! to use their capabilities instead of doing it in-house.

Copyright October 1999, Crain Communications Inc.

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