November 18, 1998 4:00 AM PST

Netscape renegotiating with Infoseek

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Netscape Communications has quietly initiated negotiations that could terminate or at least decrease the prominence of Infoseek's search engine on the Netcenter portal's Web search bar, the two companies confirmed.

According to an Infoseek filing with the Securities and Exchange Commission, Netscape notified the rival portal on November 11 of its intent to "either terminate the contract or negotiate a new agreement to afford Infoseek with different positioning or a lower rotation percentage on the Netscape site on pricing terms to be mutually agreed."

Infoseek would not comment on the extent of the negotiations, but a company spokesman said the talks were in preparation for April 1999, when its contract with Netscape expires.

Netscape also declined to comment on specifics of the talks, but added overall negotiations in the coming months with other search providers "could mean moving traffic for Netscape-branded search," said company spokeswoman Jody Kramer.

Infoseek currently appears on the Netcenter search bar 15 percent of the time users visit the site. Its placement was established in May when Netscape signed a $70 million deal for Excite to power Netcenter's search engine, as well as some of its content channels.

Infoseek shares its place as a "premier" search provider with other search directories, such as Lycos, LookSmart, and AltaVista.

The search deal gave Excite primary placement for 25 percent of all visits to Netcenter, and Netscape-branded search (which is powered by Excite) another 25 percent of the rotation. Netscape then divided the remaining 50 percent among the four "premier" search providers.

By the second year of the deal, Netscape will increase its rotation to 50 percent, diminishing Excite's to 25 percent. The combined premier providers will divide the remaining 25 percent.

Netscape's intentions to renegotiate and possibly end its agreement with Infoseek could be fueled by its need to drive more traffic to Excite, or even to its own branded site, said an analyst speaking under condition of anonymity.

Although Netscape would not confirm or deny the analyst's comments, Kramer did allow that Netcenter was "in process of looking at different options" to "optimize different revenue."

"It could mean giving more traffic to Netscape branded search or other premier search provider," said Kramer.

Both companies would not comment whether the renegotiations were in reaction to the upcoming beta launch of the Go Network, Infoseek's jointly produced Web portal with Walt Disney Company. Infoseek shareholders will vote to approve the deal today.

 

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