The Lycos/USAPowerhouse is Born

After months of speculation and rumors of a Lycos (Nasdaq: LCOS) buyout, the company finally announced on Tuesday that it will merge with USA Networks, Inc. (Nasdaq: USAI) and Ticketmaster Online-Citysearch, Inc. (Nasdaq: TMCS), to form one of the world’s largest e-commerce-fueled businesses.

The new company, known as USA/Lycos Interactive Networks, Inc. will have, at its inception, a combined revenue of more than $1.5 billion (US$). Not a bad start, indeed

Under the new agreement, USAi will contribute the Home Shopping Network, Ticketmaster, and Internet Shopping Network/First Auction to the combined venture with Lycos.

The Big Picture

This announcement follows other recent major media/Internet consolidations like those of @Home with Excite, Netscape with America Online, Disney with Infoseek, NBC with Snap, and Yahoo! with GeoCities.

These mergers of traditional media and Internet companies point out the new trend of blurring the lines between “static” and interactive entertainment. The acquisition of e-commerce properties is increasingly seen by Big Business as a strong revenue growth sector with a proven, albeit brief, track record.

In the past few months, Lycos was reported to have held talks with NBC, Bertelsmann AG, and Time Warner regarding possible buyouts. Goes to show the value of “talk”

Opinion: Will The Deal Produce E-Commerce Results? Some industry analysts have played down Lycos’ ability to catch up with some of its larger competitors. However, money is made not by “catching up” with the Joneses but, rather, in absolute terms.

E-commerce success for this new mega-company is almost a no-brainer with the tremendous consumer reach of USA Networks’ television properties. If the new company decides to pull consumers to its new e-commerce sites (as it already announced it intends to do), it will almost certainly succeed.

For example, Warner Bros. and the E! Channel are experiencing significant e-commerce success by marketing to consumers through television. Perhaps their e-commerce income only amounts to a fraction of the earnings of their other ventures, but the tide is turning quickly in favor of Internet-driven revenues.

This new Lycos deal will only start to reveal its true e-commerce value in the next 2 to 5 years. For the time being, the companies are wise to begin now, at the entry point in the history of e-commerce. The early start helps position them for success, as more and more consumers begin to shop online, and interactive technology develops e-commerce potential in ways unimaginable just yet.

Staggering Figures

According to the companies, on the first hour of the first day, USA/Lycos will have the immediate capacity to reach 70 million television homes, take more than 1 million transactional phone calls, and ship more than 200,000 units each day.

On the Internet, USA/Lycos will reach approximately 30 million people, nearly 50% of all users, through its network of Web sites. The company will operate four of the top 20 Web sites — Lycos, Tripod, Hotbot and Angelfire — and a network of 19 online city guides.

USA/Lycos will immediately handle more than 1 million online transactions per quarter, including online real-time auctions. It will be a global company with interests or holdings in Canada, Mexico, South America, Asia, Europe and Australia.

Cross Promotion will Be Key

USA/Lycos will be heavily promoted across USAi’s television channels, which according to the company, reach 90% of U.S. households. Channels include the USA Network, the Sci-Fi Channel, Studios USA, and USA Broadcasting. In return, the USA Network will also benefit from the strength of the Lycos Network by introducing its Web audience to USAi’s programming. In addition, USA/Lycos advertisers and commerce allies will benefit from access to TV, online and Ticketmaster outlets, creating new e-commerce and promotional opportunities.

According to Barry Diller, chairman and CEO of USAi, “This places all the necessary ingredients for electronic information and commerce, from ‘old’ soup to ‘new’ nuts, into one centrally and aggressively managed enterprise. There is no excuse now for us not to be a dominant player as the world continues its transition towards interactive systems.”

As president and CEO of Lycos, Robert Davis naturally agrees. “Lycos has not only survived the portal wars, but with USA/Lycos we have vaulted past our competition and dwarfed them in revenue, earnings and cash flow,” he said.

The New USA/Lycos Web Lineup

Lycos (www.lycos.com)

Tripod (www.tripod.com)

Angelfire (www.angelfire.com)

MailCity (www.mailcity.com)

HotBot (www.hotbot.com)

HotWired (www.hotwired.com)

Wired News (www.wired.com) WhoWhere? (www.whowhere.com)

Suck (www.suck.com)

Webmonkey (www.webmonkey.com)

Ticketmaster Online (www.ticketmaster.com)

CitySearch (www.citysearch.com)

The Home Shopping Network (www.hsn.com)