America Online's acquisition of Netscape will make AOL the undisputed king of Internet reach. But lumping AOL's and Netscape's audiences together for marketing purposes apparently isn't in AOL's plans, nor would it be a wise move, say industry observers.
Once AOL takes over Netscape, one out of three U.S. adults who go online at least once a month will start their online sessions on a Web page owned by AOL, according to research firm Cyber Dialogue, New York.
“Based on audience reach, this deal makes AOL the hands-down winner of the race to capture online eyeballs,” said Thomas Miller, vice president, Cyber Dialogue.
Overall, AOL properties under the deal will reach some 70 percent of the U.S. online market, including the third that begin their online sessions either by signing on to AOL (www.aol.com) or Netscape's Netcenter (www.netcenter.com).
However, from an advertising perspective, the deal involves two very different audiences.
“Our surveys show that Netscape's typical customer is far more businesslike and oriented toward efficient use of the Internet,” he said. “They're not likely to tolerate a barrage of unsolicited online merchandising offers.”
For example, 61 percent of Netscape Navigator users surveyed by Cyber Dialogue said the Internet makes them more productive at their jobs, compared to 37 percent of AOL users.
Also, Netscape Navigator users are less likely to buy products online from a third party like AOL. Thirty-two percent of them said they shop online by going directly to retailer Web sites compared to 16 percent of AOL users.
Indeed, AOL has indicated it will treat the two audiences differently — an approach that would be consistent with AOL president Bob Pittman's history as one of the creators of MTV, who helped launch VH1 to appeal to an older audience and Nickelodeon for children.
As a result, an AOL business-to-business marketing focus on Netcenter wouldn't be surprising, said Stuart Gibbel, director of marketing for Cyber Dialogue.
Meanwhile, ownership of AOL.com and Netcenter will mean AOL has two of the most popular sites online, putting AOL way ahead of Web titan Yahoo.
AOL's 14-million users added to Netcenter's 20-million visitors a month will mean that 58 percent of surfers will visit an AOL-owned site monthly, according to market researchers International Data Corp.
But Yahoo believes its recently publicized focus on direct marketing will help separate it from AOL in the minds of consumers and advertisers.
“There's nothing under the covers over at Netscape that sounded even close to a direct marketing mindset or [direct marketing] set of services coming up [for marketers],” said Jeff Mallett, chief operating officer at Yahoo, Santa Clara, CA. “There are no signs here that this is going to be a direct marketing platform that they bought over at Netscape.”
Direct marketing has been on the front burner at Yahoo since it announced in October that it would acquire Internet direct marketing firm Yoyodyne, Irvington, NY, for $30 million in stock.
Yahoo still believes it is on the right track pursuing Yoyodyne's permission-based marketing model (where consumers give permission to be pitched) as opposed to AOL's online marketing style that “is a little more in your face,” said Mallett.
“I think [AOL's splash-page marketing style] works well in a proprietary environment where people don't have choice. But we don't think strategically on the Web, that that's the best approach.”
However, the temptation for AOL to pitch products and services on Netcenter may be too great to pass up, said Evan Neufeld, online advertising analyst for New York research firm Jupiter Communications. Many of the marketing deals AOL has struck during the past few years offer significant revenue-sharing opportunities for AOL if it passes certain selling benchmarks.
If Netcenter is like most Web sites, about 80 percent of its ad inventory goes unsold, said Neufeld.
“Obviously the more inventory you have to deal with, the more results you can generate,” he said. “If you've gone to the AOL proprietary service lately, they've got ads hanging up all over the place. This deal is going to open up a lot of inventory for them.”
It is expected to close in the spring of 1999, subject to regulatory and shareholder approval.