The pact plugs a gaping hole left by Bertlesmann. Last year, the German music and content giant rethought its $1 billion advertising commitment to Terra Lycos after the market soured.
At the time, Telefonica, which owns nearly 40 percent of Terra Lycos, pledged to cover the difference. But more than make good on a promise, the partnership reflects a trend of access providers teaming with their content counterparts to woo subscribers in the face of heated competition.
For example, Yahoo! is bringing its partner strategy to Europe, singing a deal with British Telecom’s broadband arm. Yahoo! has seen success with a similar model in the United States, through communications provider SBC.
Terra Lycos and Telefonica, based in Madrid and Barcelona, respectively, said the new deal responds to “changes that have taken place in the Internet business, especially the development of broadband, and the need to adapt the products and services catalog offered by Terra Lycos in the agreement signed in May 2000 to the new market reality.”
Also under the deal, which is renewable annually after the initial term, Terra Lycos will: provide e-mail, messaging, personal Web pages and other services to Telefonica subscribers; develop and maintain Telefonica’s corporate sites; and roll out new premium content offerings.
Meanwhile, Telefonica, which has 77 million customers in 16 countries in Europe and Latin America, will become Terra Lycos’ exclusive connectivity and wholesale access provider.