24/7 Becomes No. 4: Lycos Deal Elevates Its Web Ad Standing

In a deal that alters the online playing field, Terra Lycos severed a long-standing relationship with DoubleClick and struck a five-year agreement with 24/7 Real Media to handle its media sales, ad-serving and analytics technology and services for all of Lycos' U.S. Web properties. The deal - when coupled with all of the existing Web properties it represents - elevates 24/7 to the fourth largest media entity on the Internet.

The deal follows a shift in Terra Lycos' U.S. business strategy, which it has shifted from a pure ad-supported model to a premium content subscription-based service that still includes display advertising opportunities.

"Display advertising is still an important part of our business and we sought a total advertising solution with 24/7 Real Media," said Mark Stoever, executive vice president of Terra Lycos, noting that the change in its business made it necessary for Lycos to outsource its advertising sales.

As a result, Lycos, which was one of the Web's original search engines, will slowly dismantle its media portal business and focus on premium subscription services like online dating and Web publishing. The restructuring should mean job cuts of up to 20 percent for Lycos' U.S. staff of 418. Cuts are expected to be especially heavy in Lycos' ad sales department, which will no longer be needed following the deal with 24/7.

Lycos' properties account for 50 million monthly unique users, according to comScore Media Metrix. Its U.S. network includes Quote.com, Trippod.com, Angelfire.com, HotBot.com, Matchamker.com, and Wired.com. Once the 24/7 deal is cemented, the 24/7 Web Alliance will be the 4th largest Media Entity on the Internet, with more than 66 million monthly unique users.

David Moore, chairman-CEO of 24/7 Real Media, refers to the Lycos suite as "the crown jewel" in the 24/7 Web Alliance, which also includes the Interactive Women's Forum, Investors.com, and Yahoo!'s South Korean properties, among others.

"Lycos is a landmark deal for us because they bought the entire solution: sales, ad serving, analytics," he said. "I think they switched because we can generate incremental profits for them at a lower operations cost."

Moore added that the Lycos deal should amass considerable attention from the advertising community. "The extended reach of our properties definitely puts us in a much better position in terms of what we have to offer marketers," he said.

24/7's gross margin for their media business is 35 percent; Moore mentioned that they should maintain that 35 percent gross margin with Terra Lycos. 24/7 expects the deal to earn them $11-14 million in ad revenue.

DoubleClick, which will lose its business with Terra Lycos, declined to comment.

Top Four 'Ad-Focused' Web Entities


                       Total Unique Visitors 
Yahoo!                      109,541,000           
Advertising.com
105,489,000 
MSN                         100,037,000 
24/7 Web Alliance            66,068,000

Source: comScore Media Metrix, custom run for 24/7 Real Media, December 2003.
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