Case Study
Terra Lycos: Go Get It!
In a few short years, the Internet has revolutionized the way companies do business. Of course, there have been huge successes as well as painful failures among the companies that have embraced the Internet-particularly those that have relied on the Internet for their very survival. But overall, the Internet offers global opportunities for a variety of individuals and organizations. One of those is Lycos Inc.
Founded in 1995, Lycos Network was initially an Internet portal-an entryway much like its larger competitors Yahoo! and America Online. Within a few years, experts predicted that the company would capsize in the Web, swamped by its giant competitors. “We were in danger of being an afterthought in early 1998,” recalls Lycos chief financial officer Edward Philip. But a series of changes has turned Lycos around. Today, according to industry watcher Media Matrix, the company’s collection of sites is the fourth-largest destination for people using the Web. “We had less funding and were late to market, yet we beat the odds and have flourished,” boasts CEO Bob Davis. The company also has a new name: Terra Lycos. More on that later.
Lycos saved itself largely through a series of alliances and acquisitions, along with the introduction of new tools and services that benefit both consumers and business customers. One service, the “Lycos Daily 50 Report,” helps marketers follow emerging consumer trends by tracking the topics that typical users search the Internet for. The report is simply a list of the fifty most popular search terms of the past seven days. It removes company names, porn sites, and Internet utility terms such as “chat room” and comes up with the fifty most useful words and phrases. “Our goal is to create an up-to-date list of the people, places, and things that Internet users are interested in,” explains Jonathan Levine, director of content development. “It’s a great way for people to stay current. For marketers, this tool can be used to get an idea about emerging consumer trends.” This is just one way that the Lycos site helps create opportunities for other businesses.
During the past few years, Lycos has allied with or acquired companies such as Tripod Inc. and HotBot. Lycos and Bell Canada created a now company called Sympatico-Lycos, which would provide Canadians with expanded Internet resources for the business-to-business market. In the fall of 2000, Lycos became the ” exclusive community provider for the Olympic Games,” hosting and managing all Olympic athlete chats, message boards, and fan clubs for the Sydney Olympics. McDonald’s joined the party as a sponsor of the Lycos Olympic site, in exchange for featured advertising. ” This is a powerful combination linking two global leaders in support of the Sydney Olympic Games, and we look forward to continuing to work with McDonald’s to further leverage the strengths of both companies,” stated Jeff Bennett, senior vice president of corporate development at Lycos. Later, Lycos Asia received a license from the Chinese government to operate one of China’s first foreign-owned Web sites. Previously, foreign-owned Web companies could function only through partnerships with Chinese institutions that would exert control over operations.
While all of these alliances are potential opportunities, they also increased the complexity of the company-and the complexity of its problems. So, Lycos hired its first chief information officer, Tim Wright. “They were looking for someone with experience in acquisitions, someone who knew how to handle multiple staffs of skilled people and knew how to blend disparate pieces together,” Wright explains. In other words, Wright’s job was to figure out how to weave technology and people together in a way that allowed workers and managers in the acquired companies to continue to do what they do best. He also showed them how their relationship with Lycos could actually increase their business. “We let [acquired companies] know right away that we can help them by redirecting our traffic to their site and re-circulating traffic back their way,” says Wright.
But the biggest deal for Lycos was still to come. The company agreed to be acquired by Spanish Internet service provider Terra Networks in a stock swap that valued Lycos at around $12.5 billion, with the idea that the merger would begin to create a megaportal to the Internet that would dominate Europe and Latin America. Pep Valles, the founder of Terra, views the deal as the global opportunity of a lifetime. “Who hits first hits twice,” he remarks, repeating an old Spanish saying. “On the Internet, who hits first hits ten times.” He sounds a bit like the first Lycos television commercial, which brought Lycos to the attention of many American consumers. The ad featured a black lab retriever named Lycos who streaked back and forth from the edge of the world to his owner, finding anything that his owner asked for. “Go get it!” the voice of Lycos’s owner commanded. And Lycos did.
QUESTIONS
1. Using information in the Text, outline three ways that you think Terra Lycos could help other businesses create opportunities for themselves using the Internet.
2. What methods might Terra Lycos use to measure the effectiveness of the various Web sites of its affiliates and subsidiaries?
3. Identify three challenges that managers of Terra Networks and Lycos will likely face as they merge the two organizations.
4. Visit the Terra Lycos web site at www.lycos.com. As a user, what do you think its strengths and weaknesses are?
