Less than a week after Microsoft's surprise buyout of the free email service Hotmail, the Internet indexer Yahoo has bought a sizable chunk of the world's largest supplier of free personal Web pages, Geocities.
Last Monday Yahoo agreed to invest $5 million in newly issued common stock in the privately held firm.
"This agreement between GeoCities and Yahoo aligns two of the top five sites on the Internet and will vastly increase the amount of traffic and new homesteaders on GeoCities," GeoCities' founder and chief executive David Bohnett said.
GeoCities already has a relationship with one of Yahoo's main rivals, Lycos: it provides access to the Lycos-created search catalogue of GeoCities.
Behind the scenes, though, it is Yahoo's primary investor - Softbank Holdings of Japan, which holds 30 per cent of Yahoo's common stock - that is really doling out the cash in the Geocities deal. Softbank has also agreed to invest $25 million in cash in Geocities.
Geocities' other investors include Intel, Chase Capital Partners and CMG@Ventures (up till last week its largest shareholder).
The "cross-fertilisation" deal will make GeoCities Yahoo's partner in providing personal Web home pages for registered users of Yahoo's site. GeoCities users will also be able to register directly on its site for Yahoo's various personalised services, including chat, email, message boards, and financial portfolios.
Yahoo and other Internet indexes and search engines such as Excite, Infoseek and Lycos are all attempting to create Internet users' entry points to the rest of the Web. But now they are straying from their roots as "navigational hubs", as they diversify and search for profits. Instead of merely pointing users to other spots on the Net, they aim to create all-in-one Web sites to retain their visitors - and the advertising money which follows closely in their wake. Search companies traditionally helped users to go somewhere else. But for businesses based on selling advertising space, it makes more sense to make your visitors stick around. Hence the growing number of features which have sprouted on the search sites in the past six months, from chat rooms and online pagers to stock quotes, horoscopes, personalised news, shopping and now even free email and free Web space.
Some of the largest "search engines" have turned into fully blown "content aggregators", and Yahoo's increasingly elaborate site looks on its users as "Yahoo subscribers". The personalised content and sub-categories also mean it can target users more narrowly. A Yahoo advert costs two to eight cents for each time it is viewed - the more narrowly the ad is targeted, the higher the price.
Last October Yahoo bought the free email and directory company Four11 for over $90 million in stock. And last week Microsoft bought the rival HotMail in a deal that some industry sources estimate was worth up to $400 million. Only last Wednesday, just two days after the GeoCities deal, Yahoo was expanding yet again, buying a $1.35-million minority stake in AudioNet, the Dallas-based Internet broadcaster. AudioNet will provide Yahoo with access to its live and on-demand audio and video broadcasts (from radio and sports to popular music).
In such a crowded and crucial sector - and with the recent entry of very large players such as Microsoft, the intense competition is bound to lead to some spectacular crashes. But while most search engines and indexes have been big money losers so far, they also account for about a fifth of online advertising revenue.
Netscape also recently launched a content site aimed at business users, and Microsoft is apparently developing its own search engine, codenamed Yukon. In this market, almost anything might happen.
Michael Cunningham is at: mcunningham@irish-times.ie