The @Home Network doesn't boast nearly the numbers of visitors that Web directories like Yahoo, Excite, Infoseek, and Lycos have been spinning into big dollar marketing deals. But the Net-access-over-cable company has something equally valuable: fat pipes that are helping it attract a number of marketing partnerships of its own.
On Monday, @Home announced an agreement with Arepa Inc., a Cambridge, Massachusetts company that has designed a platform allowing users to easily access and run high-bandwidth software over a network. The platform promises to take full advantage of the inherent high connection speeds of @Home's broadband network, allowing users to rent even large multimedia programs like the video game Riven.
"A CD-ROM like Riven is just too big to be downloaded. It won't fit on people's hard drives. So you have to run it over the network," said Arepa founder, president, and chief executive Ric Fulop. "We designed protocols and an architecture that allows that to happen for the first time."
As part of the agreement, @Home, which worked closely with Arepa to develop the platform, has acquired warrants for equity ownership in Arepa.
The Arepa deal is the latest in a recent string of partnering arrangements. Other notables include Travelocity, which @Home signed on as its exclusive travel booking services provider, and Release Software, which sells software over the Internet. The Release deal created an online store called SoftwareNow on the @Home Network which the two are billing as "the fastest online store on the Internet."
And as @Home's subscriber base grows, it'll be that much easier for the company to sign up more deals. For now, while the giants among Web sites, like Yahoo, measure their traffic in millions of hits per day, @Home has just passed into the 100,000 realm. But analysts expect those numbers to grow quickly.
Shaun Andrikopoulos, a media analyst who covers Internet stocks for Alex Brown, projects that @Home will have 363,000 subscribers by the end of its fourth quarter. Andrikopoulos expects the number to rise to 1.9 million by the end of 1999, 2.8 million by the end of 2000, and 4.5 million by the end of 2001.
@Home hasn't publicly attached dollar figures to any of the deals it has already done, but Charles Moldow, vice president of @Home's media development division, said the deals are worth proportionally more than the deals the big Web directories have been announcing. The Yahoos and Excites can claim 100 times more users per month than @Home, but @Home's deals have been a tenth the size of theirs, or an order of magnitude better, Moldow said.
Part of the reason is that @Home's fat pipes give marketers the ability to make a richer pitch to would-be clients. "It enables us to deliver full broadband applications and experiences that are dramatic improvements over other existing Web portal and online service portals," Moldow said.
@Home's thinking is that a travel service, for example, has a much better chance of making a connection with a customer if it can show the potential traveler a video presentation of a destination. "We believe that we can deliver more value to our partners and our subscribers," Moldow said.
Moldow said that his division, which secures all of the third-party partnerships and advertiser relationships, will contribute 10 to 15 percent of the company's revenues going forward (with subscription revenues from home and business users bringing in the rest), but at some point in the future it could bring in a majority of the company's profits, because that is where the margins are so good.
Kate Delhagen, a senior analyst at Forrester Research, said @Home is in position to start raking in quite a number of deals like its recent announcements. "They're clearly in a leadership position," Delhagen said. "They will be the only large scale broadband portal for the next couple of years."
