United Online Hit as GM Deal Ends
By MICHAEL THURESSON
Staff Reporter
United Online Inc.’s largest advertising contract is expiring and won’t be renewed by General Motors Corp. a loss that will hurt advertising revenues for the Westlake Village-based Internet service provider in the coming months.
The four-year marketing alliance, signed in January 2000 between GM and United Online predecessor NetZero Inc., was billed as being worth up to $100 million including a potential GM investment. It never reached that amount GM’s spending totaled about $35 million through Sept. 30, according to a United Online spokesman, but it remained important to the ISP.
The relationship accounted for more than 50 percent of United Online’s advertising revenues in the first quarter ended Sept. 30.
In its most recent 10-Q filing with the Securities and Exchange Commission, United Online said it expects a significant drop-off in ad revenue in the first quarter ending March 31. (United Online recently switched to a calendar year.)
The deal did provide benefits for GM. Placement on United Online, which runs the NetZero and Juno services, helped GM sell enough cars to generate a $1.5 million performance bonus in the third quarter.
But the GM division that handled Internet advertising was dissolved last year. Advertising decisions are being made separately by each GM brand.
“We had a central point of contact and an exclusive with them for four years,” said Mark Goldston, United Online’s chief executive. “Instead of calling on a central unit, now we’d have to develop numerous sales people.”
United Online is addressing the revenue loss by trying to find advertising deals with other car manufacturers and cut separate deals with GM’s various brands. But the company will not dedicate additional resources to land business with GM’s various divisions, Goldston said.
Meantime, United Online has added new advertising relationships to make up for the expired GM deal. It restructured a two-year deal with Pasadena-based Overture Services Inc., a unit of Yahoo Inc., in October.
United Online had been using Overture to generate ad listings based on the Internet searches its subscribers were conducting. The original deal was to expire in March 2004 but increased competition in the search industry and Yahoo’s acquisition of Overture allowed United Online to negotiate a more favorable deal. Over the past two years, the company was approached by several competitors wanting to replace Overture as United Online’s search provider, Goldston said.
Instead of terminating the relationship, United Online used the leverage to renegotiate the deal to include Yahoo’s search technology. Now, a Yahoo search box appears in various sections of United Online’s subscriber pages.
“Yahoo pays us every time a search is generated at United Online,” Goldston said.
