Lycos to Change Hands?

According to reports published in Korean newspaper The Chosun Ilbo and Spanish newspaper Expansion, Spanish Internet service provider (ISP) Terra Lycos is set to sell its U.S.-based Lycos portal business for $100 million to Korean ISP Daum Communication Corp.

If this turns out to be true, it will be a stark contrast to the $12.5 billion purchase price Lycos fetched just four years ago. Terra bought the American portal Lycos in May 2000. Terra Lycos was in turn bought out by Spanish telecom Telefonica, which paid $2 billion cash in May 2003 for the 62 percent of Terra Lycos it did not already own, believing the Internet unit would perform better in-house than as an independent company.

While details have not been announced, documents reportedly filed with Spain’s securities and exchange commission, the Comision Nacional de Mercado de Valores (CNMV), indicate that Terra will keep key parts of its Internet business, including Terra Networks USA, its Spanish-speaking portal in the United States, as well as a minority stake in Lycos Europe.

Lycos has had a tough time competing in a crowded search market. In two dramatic announcements made in February 2004, Lycos U.S. planned to shed its portal strategy to become a vast social network, and inked a 5-year deal with 24/7 Real Media to outsource display ad sales, ad serving and analytics for its Internet properties.

The questionable plan revolved around the company’s hopes to convert users into paid subscribers of premium content and services, or of building cores of audiences around various niche sites to attract advertisers. Lycos recorded revenues of $98 million and net losses of $24 million last year.

The acquisition would add another twist to the relationship between Lycos and paid search firm Overture Services . Lycos ended a two-year agreement to carry Overture’s paid listings in November 2003 after Overture was acquired by Yahoo in July 2003. Terra Lycos filed a lawsuit saying that Overture breached the terms of its services agreement because it didn’t obtain Lycos’ consent before being acquired by Yahoo — which Lycos sees a competitor. The company immediately began supplanting Overture listings with those from rival Google.

While Daum uses Google for algorithmic search services, it has a three-year exclusive paid-listings deal with Overture which began in January 2003.