RealTime IT News

An Excite-ing Possibility to Ponder

At this point you have to take Excite@Home (athm) President George Bell's word that there is no truth to the rumor his newly combined company has been in talks with rival Yahoo! (YHOO) regarding a deal in which Yahoo! would purchase Excite for $17 billion.

Too bad, because a union of the No 2. and No. 6 Web property (according to the latest Media Metrix survey) would provide the first serious challenge to AOL's online eyeball supremacy. Throw in @Home's broadband cable access service, and you have a traffic aggregator the equal of America Online (AOL), with faster delivery capabilities than AOL's ambitious but patchwork digital subscriber line (DSL) efforts.

Sites on the AOL network had 47,197 unique visitors in June, well ahead of Yahoo!'s 37,093 and Excite's 17,122. Add the latter two together, minus duplicate users, and suddenly there's another heavyweight in the ring with AOL.

And while AOL met expectations for subscriber sign-ups in the quarterly results announced July 21, analysts such as Merrill Lynch's Henry Blodget say the 750,000 sign-ups is at the low range of what AOL had forecast for Wall Street. Further, growth was slowest in Japan and Europe, where AOL is moving aggressively to capture market share.

Of course, AOL still attracts customers faster than anyone else out there, especially in the U.S. The company now has nearly 18 million subscribers. Other companies would love to suffer this kind of "soft" growth.

Business Week, which first reported the alleged negotiations between Yahoo! and Excite@Home, indicated they were prompted by a battle over strategy between AT&T - which holds controlling interest in Excite -- and executives of the portal player. Excite's top brass supposedly wants the company to adopt a business model similar to AOL's, which AT&T CEO C. Michael Armstrong reportedly is resisting.

However, unless Bell is throwing us a curve, it appears there's no Yahoo!-Excite merger in the works. But one thing you can count on: Sooner or later there will be convergence in this space, for the eyeball gap between AOL and the other major portals is widening. Better to join forces with another company and run a strong second than go it alone as a distant runner-up. After all, in the end the market rewards sector leaders, not the plucky fourth- and fifth-place contenders.