HEARST BACKS OUT ON PLAN TO TAKE STAKE IN IVILLAGE: WEB SITE'S PRACTICE OF EXCLUSIVE SPONSORSHIPS HELPS SCOTCH DEAL

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Hearst Corp.'s talks to invest in iVillage fell apart at the last minute after the women's Web site tried to revise the terms of the deal, according to a Hearst executive.

Another executive with knowledge of the situation also confirmed the deal had fallen apart.

The Hearst executive, who asked not to be named, said the deal collapsed during the due diligence phase. Hearst, a privately held media company, had agreed to make a small cash investment in iVillage (www.ivillage.com) and contribute "assets" from its HomeArts Network site (www.homearts.com) and media placements to promote iVillage.

LARGER INVESTMENT SOUGHT

But when iVillage executives asked to revise the terms to include a larger cash investment, Hearst balked, the executive said, adding the company was concerned about financial pressures faced by the Web site.

"It's about stability. We want to do things for the long term," the executive said.

An iVillage spokesman declined comment on negotiations with Hearst as well as financial pressures facing iVillage.

Hearst executives were unavailable for immediate comment.

HomeArts staffers also were troubled by iVillage's model of selling exclusive sponsorships for specific areas of its site, the Hearst executive said, believing it hampered the site's ability to grow.

Charles Schwab & Co. is a sponsor of iVillage's investment area and the site's book club is in partnership with Amazon.com.

The Hearst-iVillage deal would have consolidated two leading women's sites.

According to InterMedia Advertising Solutions' "InterWatch" report, Hearst HomeArts Network ranked No. 22 among the top 50 Web publishers, generating $5.2 million in sales in 1997. IVillage was ranked No. 25 and generated $4.5 million in sales.

IVillage seems intent on boosting its ad revenue.

EARLIER RAISED $32.5 MIL

In May, the independent women's site raised $32.5 million in financing through new investors, including venture capital company Boston Millennia Partners, National Bank of Kuwait and Tenet Healthcare Corp.

In June, iVillage launched its first national ad campaign created by DDB Needham Worldwide, New York.

It recently added 12 executives to its sales team, including John Glascott, senior VP-sponsorship, who was previously senior VP-director of corporate marketing at Hearst Magazines.

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