Shareholders approve Lycos’ $4.5 billion merger with Terra Networks.
Terra’s business model is changing and Lycos is an essential for its success. Although Terra is one of the world’s largest ISPs – second in Japan and Germany and first in Latin America and Spain – it is changing its business model. Moving away from relying on Internet connectivity, Terra wants to focus on eCommerce and content provision.
This is a sensible move. While there is still much room for growth in Internet connection, it is a highly competitive market. In countries where Terra has little presence, like France, the UK, and Italy, it would be up against established players. However, as the web begins to mature and eCommerce takes off, there will be increasing demand for quality content – providing lucrative advertising revenues. This is where the money will be made and Lycos is Terra’s way into these new markets. The portal and its well-know brand will be the platform for Terra’s global expansion into these new markets.
However, despite the synergies, the two companies must first resolve their differences. Even in this technological age, integration can be hampered through differences in language, corporate strategy, culture and working processes. The union between the Spanish ISP and the US portal will not be painless. The integration must be monitored closely for signs of incompatibility.
But if all goes to plan, the newly formed Terra Lycos has the potential to become the most powerful Internet company in the world. It is already the third largest, with 5 million subscribers worldwide, and outstrips both AOL and Yahoo with its $3 billion in cash.
