May 1, 2000 5:00 AM PDT
Lycos, Yahoo step back from ambitious broadband plans
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Faced with the reality that high-speed Net connections remain limited in availability, the two companies have stepped back somewhat from their plans for new applications and content designed for high-speed, or "broadband," platforms, though their competitors forge ahead.
"Deployment has been a challenge for broadband to date," said Michele Pelino, an Internet analyst at The Yankee Group, a market research firm. "Are you going to spend a lot of money to reach only 3 percent of the households? I'm sure that's part of the issue."
Fearful of falling behind in the eyes of investors, Internet portals had rushed to match rivals' broadband announcements, promising to take advantage of technology they hadn't tried and even technology that had yet to be launched. In backtracking on some of those early plans, Yahoo and Lycos offer a cautionary tale of how Internet fads frequently can run ahead of the supporting infrastructure for new technology, a scenario that could be played again as portals turn their attention toward wireless delivery.
Promises for broadband erupted last year after Excite.com merged with cable Internet service provider @Home Network, as Web companies quickly tried to reassure investors they were keeping up with the pack.
Lycos, for one, began developing a service dubbed "Lycos Lightning" last summer. The move was one response to an overall trend among Web portals to offer services to consumers using high-speed Internet connections.
But nearly a year later, the company has yet to reveal much about its high-speed plans. Contrary to the strategies of competitors such as Excite@Home and the continued growth of broadband services, Lycos appears to be having second thoughts about putting the broadband portal atop its list of priorities.
"That's an example of where we're making a much, much smaller bet relative to the bet Excite is making. Excite has effectively bet their whole company on a broadband strategy," said Ron Sege, executive vice president at Lycos. "We look at the marketplace and say, 'Well, broadband certainly is important, but there's 50 narrowband connections still in the United States for every broadband connection, so let's be careful about how much energy we put into broadband.'"
Lycos is not alone.
Yahoo, which last year said it was involved in a similar project dubbed "Turbo Yahoo," has also taken its broadband efforts off the front burner. According to a company representative, Turbo Yahoo was never a real project internally.
Rather, it was "a term that was coined by the media," the representative said, noting that Yahoo's broadband efforts have largely fallen into the hands of its multimedia division, Yahoo Broadcast. However, the company recently launched Yahoo FinanceVision, which broadcasts original financial news programming over the Internet, clearly a broadband service.
Nonetheless, in an interview with CNET News.com in January 1999, Yahoo president Jeff Mallett said the company had been developing ways for high-speed Internet users to receive enhanced versions of the company's existing services. He also said the Turbo Yahoo project was not bent on developing a new broadband service from scratch but rather service upgrades throughout its networks.
"When we get enough critical mass from content and services underneath Yahoo, we'll give our users an option--if they are at a 128 kbps-or-above range--to view the site in a 'turbo' view, which won't take away from Yahoo as you know it today but will lead in with the multimedia stuff first," Mallett said.
While broadband today remains limited in availability, many analysts believe high-speed connections will inevitably enter U.S. online households, posing a huge opportunity for any Web company. A variety of new technologies are emerging that allow online connections faster than the more common dial-up modems. A high-speed portal could serve to differentiate Lycos from its larger competitors, which primarily serve millions of dial-up, or "narrowband," Internet users.
Investment bank US Bancorp Piper Jaffray estimates there will be 12.9 million digital subscriber lines (DSLs) in the United States by 2002, while International Data Corp. expects more than 27.3 million people worldwide will use DSL by 2003. Cable modems and other high-speed options, including satellites and wireless, will only add to the broadband bonanza.
The Yankee Group has less optimistic forecasts for broadband services, estimating 3.3 million households will have high-speed access by the end of the year and 16.6 million by 2004.
In response to the growth of high-speed connections, other portals are aggressively embracing broadband despite the market's nascent status.
For example, Excite@Home recently announced it intends to shift the majority of its resources and personnel toward developing content and applications for broadband users. Company executives believe that now is the time to lay claim to the high-speed market and that broadband investments today will pay huge dividends in the future.
Similarly, NBC Internet is developing a broadband entertainment portal dubbed NBCi.com and owns a stake in Snap, a smaller, general-interest portal that offers a high-speed version named Snap Cyclone.
CNET Networks, publisher of News.com, owns a stake in NBCi. Snap was a CNET spinoff.
America Online is developing AOL Plus in conjunction with partnerships with major local phone companies such as SBC Communications and Bell Atlantic, though development has progressed slowly.
Some analysts question whether Lycos and Yahoo are lagging behind in the broadband content race.
"We think that Yahoo and Lycos are missing the boat a little bit in letting Snap and NBCi get a jump," said Dylan Brooks, an Internet industry analyst at market watcher Jupiter Communications. "Yahoo, Lycos and (Microsoft's) MSN might be missing out a bit. They feel like they can come in later and launch (broadband services) when there's critical mass."
Brooks believes Lycos is putting its priorities on developing content and services for wireless phones, another market that is expected to see explosive growth. But many analysts, looking at the attractive demographics and shopping habits of most broadband users and the relative difficulty of devising Internet services for tiny cell phone displays, question those portals that plan to postpone broadband development.
Still, Brooks said he understands the portals can't focus on every new opportunity immediately.
"These portals only have so much energy and money...No one entity will end up winning on all platforms. There'll be different winners in different areas," he said. "It's not necessarily a bad thing to pursue one platform or the other. It's better to do one or two platforms right than to not do any of them well."
Lycos executives said the company will continue to develop broadband services on a limited basis until high-speed technologies become more ubiquitous.
"(Broadband is) an example of something we're doing enough of to satisfy the limited user base, but we're not overinvesting," Lycos' Sege said.