GoTo.com, Inc. (Nasdaq: GOTO) will provide search services for users of America Online (NYSE: AOL) as part of an expanded agreement announced Tuesday by the two firms.
The $50 million (US$), multi-year alliance builds on existing arrangements GoTo.com has with AOL’s Netscape and CompuServe affiliates, the companies said.
AOL will distribute GoTo.com’s pay-for-performance listings on the search results pages of AOL, AOL.com and Netscape Netcenter, the companies said. The agreement provides GoTo with access to more than 23 million AOL members, as well as to visitors to the sites.
GoTo said its “premium listings,” which include only certain ads submitted by its base of 29,000 advertisers, will be the exclusive pay-for-performance product in those AOL search areas. GoTo’s complete search engine will continue its rotation on Netscape’s NetSearch page.
Reaching a Big Audience
“We estimate that GoTo will now reach 60 million unique users, which we believe represents more than 75 percent of the total Internet audience,” said GoTo chief executive officer Ted Meisel.
Added Meisel, “We believe our advertisers will benefit from the quality and volume of the traffic from AOL’s members. Not only is this our largest affiliate deal to date; this agreement is important because it provides GoTo with the opportunity to generate significant financial upside.”
News of the agreement sent GoTo shares up 2 5/32 to 21 21/32 in early trading Tuesday.
Barry Schuler, president of AOL Interactive Services, said the agreement “adds a great new product offering” to his company’s “core suite of services.”
E-tailers Shift to Net Ads
Online retailers are beginning to shift their advertising dollars more toward the Internet and away from more expensive broadcast ads, according to a recent survey from Shop.org and the Boston Consulting Group. Companies spent about 59 percent of their marketing budgets on online advertising in the second quarter, up from 49 percent in the first, the survey found.
GoTo provides advertisers with connections to customers of its Web site partners. It also provides search engine, comparison shopping and auction searching services to Web sites. The company says it reaches about 24 million unique users through partnerships with companies including Microsoft Corp., EarthLink/MindSpring and Go2Net.
‘Paid Clicks’ on the Rise
GoTo, headquartered in Pasadena, California, says it matched about 93 million users with advertisers during the second quarter. Advertisers paid the company an average of 21 cents for each “paid click,” up from an average of 11 cents a year earlier.
GoTo.com reported a 478 percent surge in second-quarter revenue to $21 million. The company lost $11.2 million, or 23 cents per share before charges, compared with a loss of $7 million, or 20 cents, in the year-earlier quarter.