July 29, 1997 6:45 PM PDT

Yahoo, Visa end e-commerce pact

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Yahoo (YHOO) and Visa International have scrapped their e-commerce joint venture for a straight investment and marketing alliance.

The new agreement reflects significant changes in the original Visa-Yahoo pact of April 1996, which envisioned a central commerce site called Marketplace. But Yahoo's Jeff Mallett, senior vice president of business operations, said that approach has been abandoned in favor of threading e-commerce activities throughout Yahoo's Web sites, which include the largest yellow pages directory on the Web.

Yahoo, meanwhile, has had to restate its recently released second quarter results as it recorded a one-time, pre-tax charge of $21.2 million to reflect its issuance of 466,321 shares to Visa Group.

Under the revised results, Yahoo had a second quarter net loss of $20.5 million, or 74 cents a share, instead of a slight profit of $610,000, or 2 cents a share.

The deal also buys out Visa's 45 percent stake in the joint venture.

For Yahoo, the agreement gives it full ownership of its e-commerce activities and opens new revenue sources, including revenue from its credit card, new Visa ads, and ad banners and sponsorships that it will sell in the new shopping directories.

But just as important to brand-conscious Yahoo, it associates the company with Visa's well-known brand worldwide.

"It's the world's most trusted payment brand," Mallett said. "When a consumer goes to the shopping guide, it gives Visa branding play and associates that brand with Yahoo shopping services."

The new pact includes a Yahoo-branded Visa card due this year that will generate transaction fees for Yahoo. Initially, the card will carry a standard magnetic stripe, but Mallett said his company eventually wants to move to a smart card with a chip on it.

The companies also will cooperate on a new, cobranded Yahoo directory of 100,000 shopping sites on the Net and a directory of merchants that support the SET (Secure Electronic Transactions) protocol for online credit card transactions. Other joint promotions involving the two companies are planned online and in traditional media.

"We originally invested $300,000 in the joint venture," said Todd Chafee, Visa senior vice president. "Now we're liquidating the joint venture and they're paying us $21.2 million in stock."

Visa will provide personal-finance planning information and tools similar to those displayed on Visa's Web site for the shopping directory, called "the Visa Shopping Guide by Yahoo."

Many Yahoo pages will sport a "Yahoo Prefers Visa" logo, and Visa will expand its advertising on various Yahoo sites. Visa also will endorse Yahoo as its preferred Internet guide to its member financial institutions.

Separately, Yahoo said today it is splitting its shares, three for two.


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