Web hosting hot property Verio Inc won a boost yesterday through a three year exclusive partnership with America Online Inc that will see AOL working to recruit web hosting customers for Verio in exchange for a large media buy of banners, buttons and keywords by Verio. Verio has agreed to spend a minimum of $42.5m over three years on the media buy and will be the only company allowed to promote web hosting services at AOL’s small to medium business customers throughout AOL’s major properties, including the AOL proprietary service, AOL.com, CompuServe and Digital Cities.
The 7,000 AOL PrimeHost and CompuServe Business Web hosting customers will be moved over to Verio, but to Verio, which already has more than 200,000 such customers, that is not the main attraction of the deal – it has acquired the PrimeHost and Business Web brands, but is not certain whether it will maintain them or not at this point, says Sean Brophy, Verio’s VP corporate development, who negotiated the deal with AOL.
More important is the revenue-sharing component of the agreement, which should be the catalyst to Verio’s customer growth. Once Verio has secured a certain number of new customers through the AOL relationship – Brophy wouldn’t say how many, but presumably tens of thousands – Verio will share the revenues of any new customers with AOL. Again Brophy would not say what the split is, but it’s in Verio’s favor and is no where near fifty-fifty he says. It means that AOL has an incentive to drive customers to Verio, firstly to get up to the level at which the revenue sharing kicks in, and thereafter to earn itself revenues.
Verio and AOL also plan to work together with future integration projects, including the likelihood of combining AOL’s Instant Messenger technology with web hosting services so businesses can create buddy lists of their suppliers and customers. Further down the line, once Verio secures 200,000 customers from this deal – the fact that it talking about doubling its user base in three years from this deal alone gives an idea of how important it is to Verio – Verio will buy an additional $500,000 media buy and then the same for each 50,000 customers added after that. Some 4 million of AOL’s 18 million customers are businesses.
