Web publishers are still sorting through the significance of Yahoo!'s announcement last week that it will provide Internet access with MCI Communications Corp. While the deal gives Yahoo! marketing muscle to begin to challenge America Online, it also calls into question MCI's existing relationship with CNET: The Computer Network.
Called Yahoo! Online powered by MCI Internet, the service--which expects to go live by April--could bring Yahoo! $20 million in bounty or referral fees from MCI, according to Alan Braverman, an Internet and new media analyst at Credit Suisse/First Boston, New York.
While Yahoo! and MCI declined to discuss the financial details of the deal, Jeff Mallett, Yahoo!'s chief operating officer, said Yahoo! Online's home page would offer customized content and draw on Yahoo!'s existing news, entertainment and financial content. Yahoo! will sell ad space on the service's home page and retain all ad revenue.
GOING AFTER NEAR SURFERS
Meanwhile, MCI will handle the Internet dial-up service and customer support. MCI and Yahoo! will market the co-branded service separately. MCI also will continue its MCI Internet service and its home page.
Mr. Mallett said the main target for the service, which he said would be priced competitively, is "near surfers"--people without Internet accounts who surf from school or work. Yahoo! has 26 million unique U.S. visitors every month, while MCI Internet, according to industry estimates, has 250,000 subscribers.
MCI long-distance customers would also be targeted, added David Trachtenberg, director of brand marketing at MCI. "We'll be using offline and online marketing vehicles," Mr. Trachtenberg said.
However, the deal raises questions about MCI's marketing alliance with rival Snap! Online, a service from CNET that acts as a default home page with content.
MCI Internet's home page currently lists partners, including Snap!, WhoWhere? and Yahoo!
This month, Mr. Trachtenberg said, MCI will begin shipping copies of a Snap! tutorial to interested MCI customers.
"Yahoo! Online will be an important part of the marketing mix in 1998," Mr. Trachtenberg said. But he declined to say proportionately how much money would be spent to market each Internet access service.
OWNING THE DEFAULT PAGE
Halsey Minor, CNET chairman-CEO, argues that Snap!'s relationship with Sprint Internet Passport-- Snap! is Sprint's default home page--is more powerful than Yahoo!'s relationship with MCI.
Yahoo! is "not competing with Snap!" he said. Yahoo! "tried to make it look that way."
Internet access also could help Yahoo! compete with AOL, the analyst Mr. Braverman said.
"There's a lot of power by being associated with MCI," he said, explaining that Yahoo! can now benefit from MCI's prime-time commercials, something that few Web companies can afford
Yahoo!'s move is undoubtedly making search engines re-examine their strategies.
Joe Krause, senior VP and co-founder of Excite, said linking up with an Internet service provider "is a possibility. Our core business is about growing and retaining a subscriber base." But Mr. Krause declined to give any specifics.
Lycos President-CEO Bob Davis cites its deals with ISPs and media companies, including Prodigy, Sprint and European media giant Bertelsmann. "Partnering with major access points and licensing our technology has been the cornerstone of our model," Mr. Davis said.
Copyright January 1998, Crain Communications Inc.