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Lycos to Buy Gamesville.com, No. 2 Game Site

Added: (Wed Nov 24 1999)

Pressbox (Press Release) - By Eric Auchard

In the second major Internet gaming deal this week, Lycos Inc. (NasdaqNM:LCOS - news) on Tuesday said it would buy privately held Gamesville.com, the second most popular online games site, for $207 million in stock.

Lycos said in a statement it plans to fold this latest in a string of programming, commerce and community acquisitions into its network of sites, the fourth most popular on the Web.

In addition to the shares it will issue in the deal, Lycos said it would also assume responsibility for Gamesville's employee stock option program.

The deal comes a day after Electronic Arts Inc. (NasdaqNM:ERTS - news), a top maker of video game software, agreed to pay America Online Inc. (NYSE:AOL - news) $81 million to become its exclusive supplier of online games.

Gamesville.com, located on the Web at http://www.gamesville.com, has 2.2 million members who compete with other players in electronic games such as cards, bingo and sports or showbiz trivia over the Internet. It is the No. 2 most popular game site behind Uproar Ltd. (UPRO.ED).

Lycos also said visitors to Gamesville on average stayed longer on the site that any other location on the Web other than online auctioneer eBay Inc. (NasdaqNM:EBAY - news).

Shares of Waltham, Mass.-based Lycos gained 2-1/4 to 58-1/4 in trading on the Nasdaq stock market on Tuesday.

"The addition of Gamesville to the Lycos Network adds to our revenues, grows our average daily usage minutes by nearly 20 percent and adds depth to our direct marketing efforts," Bob Davis, Lycos president and CEO, said in a statement.

The site actively uses 'permission marketing' tools to custom target promotional offers to games players visiting on the site. Gamesville also targets television-like advertising at regular intervals to its members, in another example of its power as an advertising vehicle.

"We were particularly attracted to Gamesville because of the exceptional quality of registration information, which considerably expands our direct marketing infrastructure," Davis said of plans to target users with cross-promotions.

In a research note to clients discussing both the Lycos and AOL deals, Credit Suisse First Boston analyst Lise Buyer said: "Gamers tend to be 1.) be loyal and 2.) stay on line a long time. Just the sort of users advertisers -- and advertising supported sites like best."

Lycos said the acquisition boosts the audience reach of its network of sites. Lycos captured around 45.8 percent of the total Web audience in October measured by Media Metrix, which survey Internet traffic patterns.

Gamesville reaches 4.5 percent of the monthly Web audience. Eliminating duplication, Lycos said its Internet audience reach -- and by extension its power to bill advertisers -- would now top 47 percent of Internet users.

By contrast, AOL, the No. 1 ranked network of sites, is visited by 79 percent of the Internet audience, No. 2-ranked Yahoo! Inc. (NasdaqNM:YHOO - news) by 59 percent, Microsoft Corp. (NasdaqNM:MSFT - news) has a 56 percent share, according to the industry data.

The Lycos acquisition is expected to close by the end of 1999 and is subject to Gamesville.com shareholder approval.

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