Altavista Co

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ALTAVISTA CO.

AltaVista—the name means "the view from above"—is a Web portal that offers Web pages, shopping, news, live audio and video, and community resources including e-mail. The site is run by Alta-Vista Co., a majority-owned operating company of Palo Alto, California-based CMGI Inc. AltaVista is perhaps best known for its search technology. It provided the first full-text search service in the world when it was created in 1995 at the Palo Alto research laboratory of Digital Equipment Corporation (DEC). DEC's engineers devised a plan to store every word of every page on the entire Internet in a searchable index, and then utilize DEC's new Alpha 8400 computers to extract relevant information from this body of knowledge.

AltaVista has been awarded more search-related patents than any other company. The 2001 version of AltaVista Search is available in 25 languages with eight distinct search dimensions. Other innovations credited to AltaVista include the first-ever multilingual search capacity on the Internet and the first search technology to support Chinese, Japanese, and Korean languages. AltaVista created Babel Fish, the first machine translation service on the Web. AltaVista also created advanced and multimedia search centers that let users search the Web for photos, videos, and music through its index of more than 30 million multimedia objects.

HISTORY

When DEC was absorbed into Compaq Computer Corporation in 1998, AltaVista became a division of Compaq. Instead of selling off AltaVista, Compaq invested more money in it. By the end of 1998 Alta-Vista had a user base of 12 million people and 32 million page views per day. With its core strength of extraordinary search technology that generated results faster than most other search engines, AltaVista's goal was to become one of the top five sites within three years. Its principal competitors at that time were Yahoo!, Excite, and Lycos. AltaVista was generating about $50 million a year in revenue, primarily from banner ads on its site.

In early 1999 Compaq spun AltaVista off into an independent company. Rod Schrock, senior vice president of Compaq's Consumer Product Group, was named president and CEO of AltaVista Co. In January 1999, he announced: "We're going to design e-commerce into the very fabric of AltaVista." Alta-Vista got a boost from Microsoft Corp., a longtime partner of Compaq, with the addition of Microsoft's HotMail e-mail service. Microsoft also said it would provide future instant messaging technology to Alta-Vista and that AltaVista would replace Inktomi Corp. as the search engine for the Microsoft Network (MSN).

Compaq added shopping capabilities to Alta-Vista in early 1999 with the $211 million acquisition of Shopping.com, an online retailer that offered more than 2 million products over the Internet. Compaq also acquired Zip2 Corp., a company that specialized in providing directory and database services for newspapers. Zip2 Corp. had 160 media partners—newspapers for whom Zip2 put their content and advertising into an online, searchable format. AltaVista planned to combine Zip2's directory and database features with the e-commerce capabilities of Shop-ping.com and to give local merchants access to the features of Shopping.com through the Web sites of their local newspapers. The Houston Chronicle's Houston4U.com Web site was showcased as an example of how AltaVista's local portals would work.

ALTAVISTA SOLD TO CMGI INC. IN 1999

With Compaq experiencing financial difficulties following its acquisition of DEC, AltaVista was sold to CMGI Inc. in mid-1999 for $2.3 billion. CMGI gained an 83-percent interest in AltaVista, with Compaq retaining 17 percent of the company. As part of the deal Compaq received 19 million shares of CMGI stock, a $220 million three-year note, seats on the boards of directors of AltaVista and CMGI, and an interest in the 40 Internet companies operated by CMGI. At the time of the sale, AltaVista was ranked 15th among the most popular Internet sites and had fewer than 10 million separate visitors each month.

In the months following the sale, AltaVista announced a global branding campaign. Initially budgeted for $50 million, some $120 million was spent on the campaign by June 2000. The campaign coincided with the launch of an upgraded and redesigned AltaVista Network, which included features from Shopping.com and local content from Zip2 Corp. Around this time AltaVista also announced it would offer free Internet access to subscribers who were willing to view ads and provide information about themselves. In a month of testing, the free Internet service gained 45,000 users, and by October 1999 there were 500,000 subscribers to the free service. AltaVista also introduced a free "microportal" service, which gave users continual access to their own range of favorite Web sites through a window on their computer desktop.

Following the sale to CMGI, AltaVista cancelled plans to incorporate previously announced services from Microsoft into its portal, including HotMail and instant messaging. Instead, e-mail service bureau Critical Path was tapped to provide e-mail for the new AltaVista portal to be launched later in the year (CMGI was a minority owner of Critical Path). For instant messaging, AltaVista selected the PowWow instant messaging service developed by Tribal Voice.

Gearing up for the 1999 holiday shopping season, AltaVista introduced a major redesign to its Web site at the end of October 1999. Among the major changes was a simplification of its Internet searching technology, which included using subject categories to help users narrow their searches. Another major change involved the site's shopping features. The newly designed AltaVista site would rely less on Shopping.com, which had experienced a high level of complaints about late delivery of merchandise, and add a number of online stores. Other new features included product reviews and comparative shopping.

At the end of November 1999, AltaVista acquired Raging Bull Inc., an online investor chat forum and financial site partially owned by CMGI. Raging Bull was known for developing an online community for nonprofessional stock pickers and was the second most popular online investor forum behind Yahoo!'s stock market and finance section. The addition of Raging Bull was expected to build traffic at AltaVista and serve as the model for other online forums devoted to a wide range of subjects.

The changes AltaVista made to its site started to result in higher traffic. According to Media Metrix, AltaVista was the eleventh-most-visited site in November 1999, up from 15th earlier in the year. In its December 1999 filing for an AltaVista IPO (initial public offering), CMGI claimed that AltaVista was the fifth-most-popular Internet search engine. However, changing market conditions in 2000 would prevent AltaVista from going public, and the IPO was later withdrawn. Other developments at the end of 1999 included the launch of an AltaVista site in the United Kingdom, a European advertising campaign, and local rollouts in France, Italy, and Germany. Alta-Vista planned to expand its European presence to 18 countries in 2000.

NEW INITIATIVES TO INCREASE TRAFFIC IN 2000

AltaVista launched its AltaVista Affiliate Network in early 2000 and quickly gained 1,600 applications for membership in the program. Under the program, AltaVista would let Web sites of any size or scope offer AltaVista services such as search, stock quotes, or language translation free of charge. Alta-Vista also would pay affiliated sites three cents for every click-through to an AltaVista Web page. Alta-Vista planned to distribute the HTML code to allow Web sites to feature an AltaVista search box and other services on their sites. For January 2000 AltaVista moved up to the ninth-most-visited site on the Internet with 13.4 million visitors, up from 12th in December 1999, according to Media Metrix.

AltaVista's strategy for growth was focused on three principal areas: searching, e-commerce, and financial information services. In February 2000 the company introduced three multimedia search centers that allowed users to search for more than 3 million MP3, video, and image files. Through partnerships with CDnow Inc., EMusic.com Inc., and Riffage.com Inc., AltaVista was able to offer more than 1 million downloadable MP3 audio files. Through additional partnerships with ABC News Internet Ventures, Merrill Lynch & Co., and Entertainment Boulevard Inc.'s Vidnet site, AltaVista expanded its coverage of breaking news and financial and entertainment news.

AltaVista also continued to build its presence in Europe. It was able to boast that more than half of its search requests came from outside of the United States. In March AltaVista began offering free Internet access in the United Kingdom. The company noted that high telephone charges for time spent online were hindering Internet usage in the United Kingdom. However, problems with British Telecom resulted in a suspension of AltaVista's free Internet access in the U.K. by August 2000.

Financially, AltaVista had not reported a profit since its inception, but it hoped to report positive cash flow by December 2000. After canceling plans for its IPO in April 2000, the company laid off about six percent of its workforce by eliminating 50 positions. It already had cut about 60 other jobs since fall 1999. For the six months ending January 31, 2000, Alta-Vista reported an operating loss of $542.9 million, due in part to acquisitions and the addition of new features to its Web site.

REFOCUSED ON BEING A SEARCH PORTAL, 2000-2001

In the second half of 2000 AltaVista began to reposition itself as a search portal and focus on unveiling more powerful search technologies. The company introduced a new Advanced Search Center that would take up to 800 characters and allow Boolean searches. In September AltaVista cut an additional 225 employees, reducing its workforce by about 25 percent. In October CEO Rod Schrock stepped down, leaving the company to be run by President Greg Memo and Chief Financial Officer Ken Barber. In addition, Alta-Vista's free Internet service was terminated in the United States. In February 2001 AltaVista sold Raging Bull to competitor Terra Lycos.

For 2001 AltaVista appeared to be fully re-focused on its core strength of search engine technology. In addition to offering advanced search capabilities at its Web site, AltaVista was pursuing the enterprise search market by licensing its search software to businesses. In an effort to make its search results more relevant to individuals, AltaVista partnered with Moreover, a specialty search company, to make news available within 15 minutes for searching. As part of their partnership, the two companies planned to approach corporate portals with a proposal to sub-index their corporate information to enable employees to search internal documents.