Lycos focus: Eyeballs, not image

Image isn't everything for Lycos.

The less-than-glamorous nature of the Waltham, Massachusetts-based Web portal traditionally has been seen as the oddball in a party of the Silicon Valley chic. While its competitors reside in colorful offices with caches of Odwalla juice and daily foosball tournaments, Lycos defies the model.

Instead, the company tends toward a more frugal, unpretentious image, reflected by its unsightly Waltham office, about which one analyst lamented after a visit: "If someone put you down in front of Lycos's offices, you could mistake yourself for being in an accounting firm."

But it's perhaps the downplay of image and the focus on the nuts and bolts of running an efficient company that have given Lycos the push it needs to emerge from the middle ground and begin playing with the portal heavyweights.

With its recent activity, Lycos's audience numbers are beginning to distinguish it from the rest of the pack. Lycos's entire network of properties under its umbrella rank higher traffic numbers than Excite, according to Relevant Knowledge and Media Metrix. Lycos has also touted the statistic that it lags behind Microsoft by 100,000 in monthly page views.

Lycos's acquisition of Web information service WhoWhere for $133 million in stock significantly boosted its coveted audience numbers to levels comparable to Internet heavyweights. This critical step added an estimated 10.6 million registered users spread out amongst WhoWhere's suite of Web services, such as its directory listings, its free Web-based email service MailCity, and, most importantly, its Angelfire home page builder.

By combining Angelfire and Tripod, which it acquired in February, Lycos can now boast the largest population of home page builders on the Internet with 3.2 million registered members, according to figures by BancAmerica Robertson Stephens. In comparison, GeoCities has approximately 2 million registered users.

"What Lycos has done is very smart. They are not a No. 1 player, but have chosen an important tool and made themselves No. 1 in this space," said Abhishek Gami, an analyst with William Blair & Company.

In the eyes of Lycos chief executive and president Bob Davis, community is king. Davis, who prefers to call Lycos a "hub" rather than a "portal," sees the strategy of community as a way to develop a more loyal consumer base. Rather than cultivating an audience of passers-by using the service as a transit point, Lycos would rather have consumers stake a niche on its network using home page builders like Tripod and Angelfire. This, Davis hopes, will make users return to the site day after day.

"The problem with 'portal' is that it implies an entry and an exit," said Davis. "I keep people there when they're online."

Many analysts agree that Lycos's investment into communities has been wise. Given the fickle nature of Web users and the concern among companies about defections to other brands, providing "sticky" services to retain consumers has become crucial.

Already, companies such as Infoseek and Excite have offered services geared at giving users a presence on their sites and keeping them there as consistent members. Infoseek currently offers a home page builder powered by WBS. Excite this week launched a beta version of its community builder, which gives end users tools to build private communities equipped with chat rooms, message boards, and other communication features.

AOL is also jumping on the bandwagon now that it has released a beta version of its Hometown AOL Web page builder expected for release later this year.

Given the allure of these services, these companies may be a step behind Lycos.

"Nobody [in the portal race] is as committed to community as Lycos," said Andrea Williams, an analyst at Volpe Brown Whelan. "That concept is important because the risk that portals face is that [consumers] find destination sites that suit their needs and then spend more time there and relatively less time in portals. To guard against that is to develop applications, or acquire applications, that will keep consumers at their sites."

Besides its Internet community strategy, Lycos has distinguished itself in other areas enough to catch the eye of investors and analysts alike.

The company often prides itself for controlling expenses while competing in an arena notorious for spending and barely reaching profitability. Lycos has also been known to run a lean operation as one way of controlling expenses. For instance, when Lycos moved into its new Marlborough, Massachusetts office, its controller worked out of the closet that houses its servers in order to save space.

Tales such as this have given Lycos the moniker of "frugal company."

"Lycos has been very focused on the bottom line in driving towards profitability," said Mark Mooradian, analyst at Jupiter Communications. "Their financials always look very solid. They are losing less money than the Excites of the world."

Analysts also tout its executives as being strong, unrelenting negotiators who focus on the quality of deals rather than the quantity. Lycos has inked a spate of e-commerce partnerships, distribution deals, and most importantly, acquisitions that observers have applauded as being wise and clearly thought out. That is perhaps why most analysts have given its stock a "buy" recommendation.

Nonetheless, the battle has not even come close to ending, as players in this space continue to follow the course of convergence. The companies holding the middle ground and scrambling their way to the top may survive consolidation, or may disappear as an afterthought five years from now.

Lycos has yet to establish itself as a brand the way many of its competitors have. One crucial setback is that its brand has not entered the public consciousness like Yahoo and Excite, which are now almost synonymous with the word "portal." Observers point out that the problem with its brand stems from how it was originally marketed before the search and directory landscape shifted its strategy towards a media focus.

"Lycos was originally known for technology," said Dawn Simon, an analyst at Brown Brothers Harriman. "Rather than being positioned as a portal it was positioned as the best search technology, so much of press surrounding Lycos revolved around top-notch tech and not the rest of the features of the site."

Though Lycos has reaffirmed to the public that it is targeting Yahoo and AOL as its real enemy, others in the portal game say Lycos is on the way to becoming a completely different product from what it is today.

"The bottom line--I think that it's a competitive market. I think Lycos has just done a different path," said Excite executive vice president Brett Bullington. "They're building out a model focused on community and choosing different competitive sites they're going after."