Lycos

The company was relatively small in an industry with growing benefits of scale. Explicit competitive positioning came to the fore in 1997. Yahoo! had launched an effective branding campaign focused on “near surfers” people who use the Web for the first time. Its hip “Do You Yahoo!” ads contrasted sharply with conservative Lycos. Yahoo!’s “reach,” the monthly portion of Web users visiting its site, had 50%, while Lycos’s stood in the mid-teens; Yahoo! displayed 65 million Web pages to users each day while Lycos only showed 10 million. Lycos’s relatively small size hurt the firm as Yahoo! and Excite raced to add content and features with large fixed development costs. Lycos’s challenge was “keeping up with the Joneses”.

Lycos’s size disadvantage was compounded because the average user spent less time and viewed fewer pages on its site than on, for example, AOL. This was especially damaging because advertising had emerged as the dominant source of revenue in the industry. Since Lycos aimed to stay financially conservative, they did not try to spend funds on building their brand like Yahoo!. The team’s response was self-conscious and analytical. The board members acknowledged the rising economies of scale in their business and resolved to “get big fast” largely by buying undervalued acquisition targets and websites that built on themselves with little marketing expense. Homepage sites that gave users software tools and server space to build their own Web pages attracted particular attention. So Lycos acquired Tripod, a provider of home page building tools. However, after this acquisition, the board debated on how to integrate Tripod into Lycos’s existing operations and brand. There was not a defined clear strategy on Tripod’s future prior to this purchasing decision.