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CMGI Eyes Cross-marketing of Internet Properties Through Alta Vista Buy

The pending acquisition of Alta Vista by Internet investment concern CMGI promises to give CMGI's subsidiary companies additional leverage in the online marketing world by tying them into a large search engine, although CMGI and Alta Vista said they have not yet worked out the details about how the new relationships actually would work.

CMGI Inc. this week said it agreed to buy Alta Vista from Compaq Computer Corp., Houston, for common and preferred stock valued at about $2.3 billion, or about 15 times Alta Vista's annual revenues of $150 million. Compaq, which previously had announced a plan to spin off Alta Vista as a separate, publicly traded company, will end up owning a 16.4-percent stake in CMGI and will gain a seat on the company's board.

Compaq, the world's largest maker of personal computers, said it would incorporate the Internet services offered by the companies CMGI owns into its consumer and business PCs and its enterprise solutions programs. In addition, CMGI and Compaq agreed to invest $50 million each in the cross-promotion of their Internet services and properties and to work together to develop new online services.

CMGI has its work cut out for it, according to David Card, a senior analyst at Jupiter Communications LLC, New York.

“One of the things CMGI is good at is incubating companies and moving executives around and growing its investments, but this is completely different,” he said. “This is incorporating a whole search engine.”

Alta Vista, once one of the dominant search engines on the Internet, has been losing some traffic under the auspices of Compaq, which is struggling with its own executive turmoil and intense competition in the personal computer segment. Listed as the fifth-most visited Internet property on the Web just a few months ago, Alta Vista faded to tenth in May, according to Media Metrix, New York. The site had about 10.63 million unique visitors that month.

Among the initiatives planned is the incorporation of Engage traffic-tracking technology into the Alta Vista site, according to Krista Thomas, a CMGI spokeswoman. The technology prompts ads to appear on users' screens based on what other sites those users have visited.

Another benefit for CMGI could be in the Zip2 business Alta Vista owns, according to Card. Zip2 provides an online business directory that has relationships with a lot of local Internet businesses, Card said.

“Online local services and content is an underutilized segment,” he said.

The Alta Vista acquisition also would include Shopping.com, an e-commerce site offering a wide range of goods and services.

By combining its holdings of Internet companies, nine of which it owns and 30 of which it holds a minority stake in, CMGI, Andover, MA, has designs on turning Alta Vista into a massive “mega-portal” offering searches, content, e-commerce and other services, some analysts said.

If CMGI hopes to transform Alta Vista into a major portal, it will be going up against some well-established and well-capitalized competition, including such players as Yahoo!, America OnLine and the Go site, operated by the Walt Disney Co., Card pointed out.

“The idea that CMGI with Alta Vista is going to challenge those guys is misguided,” Card said.

Other conflicts could emerge from the acquisition as well. Alta Vista is about six months into a three-year advertising contract with online ad network DoubleClick, San Francisco, which is a head-to-head rival of AdSmart, the online ad network owned by CMGI.

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