The Portal Pie - Terra Lycos: Profiting from Information Products

As the big three Internet portals – AOL-Time Warner, Yahoo!, and Microsoft/MSN – continue to grow thanks to early market domination, smaller and younger portals like Terra Lycos are fighting for their piece of the action. But is there enough to go around? With Internet advertising on the slide, Terra Lycos must look for new areas of growth, and perhaps even change its business model. In this Case Study, Professor Theodoros Evgeniou looks at the economics of portals and, specifically, Terra Lycos’ search for new revenue streams.

by Theodoros Evgeniou

The economics of the “new economy” are not exactly evident. Internet portals like Yahoo! and AOL, for example, had to invent whole new business models, finding revenue streams among the variety of free services they provide. In essence this has been the Holy Grail for portals: how to get people to pay for services that others are giving away and how to capitalize on the huge number of eyeballs streaming through one’s portal.

In this Case Study, Theodoros Evgeniou, Assistant Professor of Information Systems, looks at Terra Lycos, considered by some to be a “second-tier” Internet portal, as it tries to compete with the big three – AOL-Time Warner, Microsoft/MSN, and Yahoo! – by finding new revenue streams.

Terra Lycos was born in October 2000 out of a merger between Terra Networks, a subsidiary of Spanish telecommunications giant Telefónica and US-based Lycos, an Internet portal and service provider. The merger also included a strong role for German media giant Bertelsmann, which agreed to a five-year US$1 billion deal to buy advertising and services from Terra Lycos and offered Terra Lycos exclusive access to its content.

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