AltaVista Trumps Pure Plays with Musicland Alliance

In the wake of a report predicting that e-commerce players with brick-and-mortar outlets will be most likely to survive the impending dot-com shakeout, AltaVista said Thursday it will partner with Musicland Stores Corporation, a chain that operates four Web sites of its own and more than 1,300 retail stores.

In a report released Tuesday, Forrester Research said that the majority of e-commerce firms will not survive the next two years, but that those who are able to tap customer bases from traditional retail outlets will be in the best shape.

One of the key elements of the deal for AltaVista — which is planning an IPO for next week — is access to Musicland’s customer database, which includes nearly one million members of the chain’s Replay repeat customer program along with information on 300 million store visits per year.

Repeat Customers Valuable

Management consultants Bain & Company and e-strategy consultants Mainspring reported in March that the more often a customer returns to a site, the more money they spend during each visit. The same study found that due to the high cost of obtaining customers, most e-commerce sites lose money on first-time shoppers.

Alta Vista hopes to translate Musicland’s substantial brick-and-mortar customer loyalty into stickiness on the Web.

Musicland Vice Chairman Gil Wachsman told the E-Commerce Times that the retailer expects to receive 400 million customer impressions each year through its connection with AltaVista, along with premium placement on the site’s music, video, video game and book pages.

“Our strategy has been from the beginning to fully leverage all of the brand recognition and trust that our four stores have built up,” said Wachsman. “Pure play e-commerce sites spend hundreds of millions of dollars (US$) to develop that kind of recognition and get into a relationship with a customer.”

Musicland to Market AltaVista’s Free ISP

Michael Rubin, vice president and general manager of AltaVista’s E-Commerce wing, said the alliance will provide AltaVista with additional name recognition. As part of the deal, all customers at Musicland stores will get AltaVista’s free Internet Service with each purchase. Customers who pay membership fees to join the Replay discount club will receive the ISP with their Musicland newsletters.

“Our alliance with Musicland can deliver tremendous off-line visibility for AltaVista, providing a great opportunity to reach additional users.” Rubin said. AltaVista will also benefit from Musicland’s $70 million marketing and advertising campaign, Wachsman noted.

The Minneapolis, Minnesota-based Musicland already operates four Web sites under its Sam Goody, On Cue, SunCoast and Media Play brand names.

Threat and Opportunity

In a report released in March, International Data Corporation (IDC) said that e-commerce represents both a threat and opportunity for portals such as AltaVista.

“The threat is that comprehensive merchants, such as Amazon.com, could usurp their role as the guides to Internet commerce,” said IDC analyst Malcolm Maclachlan. “The opportunity is to become the intermediaries for most consumer e-commerce.”

In the most recent weekly rankings from Nielsen//NetRatings, AltaVista was the ninth most visited site from home and the eighth most visited site from work.

Those figures placed it behind several other portals, such as Lycos — another CMGI property — Yahoo! and Excite. However, AltaVista has long argued that its site attracts top-flight Web users in terms of demographics and sophistication.

CMGI, an Andover, Massachusetts-based Internet holding company with more than 65 companies under its wing, purchased a majority share in AltaVista last year from Compaq.

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