May 23, 2000 5:00 AM PDT

Deals deliver validation to voice portal players

With two significant deals announced yesterday, the young "voice portal" industry finally may be pulling itself to its feet.

Tellme Networks announced it had struck a deal with giant AT&T that will see the two companies working together to add voice access to other Web sites. Rival Quack.com struck a similar deal with Lycos that will allow people to reach the portal's information over an ordinary phone.

The deals mark a needed validation for a market that has been long on venture capital and industry buzz but short on proven consumer demand.

The AT&T-Tellme deal also gives a glimpse at a reality some analysts say will help boost the voice portals for some time to come: The big carriers need the Net companies just as badly as the Net companies need them.

"They need to find out what kinds of additional revenue streams they can capture," said Meredith Rosenburg, an analyst with the Yankee Group. "If they can enhance their low-growth assets (such as long-distance), that's a good thing."

The voice portal business is based on the notion that some significant portion of consumers will want to access the kind of information they can find on the Web at times when no good Web connection is available. The answer, these companies think, is to allow people to call an old-fashioned phone number and have the information read to them, in much the way that MovieFone has long done with film information.

Some of the more ambitious companies are creating their own services with content created in-house, or specifically for them. Others have created technology that turns Web content into a sound file that can be heard over a phone. One even has live operators who will perform Web searches for callers in a hurry.

But while dozens of companies have now taken aim at either the service or technology end of this equation, the consumer demand has yet to make itself known. Companies like Quack.com and Tellme, which have run trials of their services, say demand has been strong but services have a long way to go before filtering into the mainstream consciousness.

That's where the new deals come in.

Tellme's deal with AT&T solidifies the small company's position as an early leader in this new industry, with $60 million of Ma Bell's money to help boost that role. The two companies will work together to help other Web companies to voice-enable their sites, as Tellme's technology becomes one arrow in Ma Bell's quickly growing quiver of business services.

That's still quite a way from Tellme chief executive Mike McCue's ambitions of becoming as much a part of every phone service as a dial tone, but it's "definitely a step toward that," he said.

Quack's deal with Lycos will move the duck-themed voice company out of its bid to set up its own consumer portal, and ultimately merge its public face with the larger portal.

"We're not going to build a portal by ourselves," said Quack chief executive Alex Quilici, whose company had already taken a few steps in that direction with its existing service. "Lycos is our portal."

The two companies will work to make nationwide information such as stocks, sports, weather and traffic available through the phone-in Lycos service, slated to launch in the third quarter of this year.

While no information on the financial portion of that deal was immediately available, Quilici said there was a possibility that Lycos could take a stake in his company.

Analysts said these were the first in what are likely to be a string of deals, as other Web sites look to follow Lycos' lead. Carriers like AT&T, hungry to see consumers use their phones in new ways, will likely also follow suit.

"One thing carriers don't have is content," Rosenburg said. "But they have a lot of phone. They have to figure out how to use that asset."

 

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