From Front Page of USA Today
Net Giants, Superstores
Teaming Up

Alliances Target Mass Markets

By Paul Davidson

USA TODAY

Internet giants and top retailers are teaming up, at a breakneck pace as e-companies look to expand into an even more mass-market audience and traditional stores try to jump-start their struggling Web sites.

America On Line and Wal-Mart, the world's largest retailer, announces the latest alliance Thursday. Early next year they will offer a discount service to connect users to the Internet, including a co-branded start page. Wal-Mart stores will distribute AOL software to customers; AOL will promote Wal-Mart.com on its site.

"We're really looking at a very, very mass market customer." AOL marketing president Jan Brandt says.

Also Thursday, Microsoft and Best Buy unveiled a partnership to demonstrate and sell Microsoft's MSN Internet access in the electronic chain's stores. In turn, MSN web sites and cable and Internet station MSNBC will promote Best Buy.

The deals come on the heels of announcements that Kmart will join with Web portal Yahoo to offer a free Internet service in Kmart stores, and Circuit City will tout AOL products in return for online advertising. Microsoft struck a similar deal with Radio Shack last month.

As the growth of the online audience slows, the deals help Internet services reach the 60% of U.S. households yet to venture online, and at a fraction of typical marketing costs.

Those households are "not as affluent or educated" as the early waves of Internet users, says analyst Ulric Weil of Friedman, Billings, Ramsey.

The AOL-Wal-Mart alliance promises to bring local Internet access to the 40% of Wal-Mark towns without it.

AOL's marketing, Brandt says, has evolved from a focus on "technogeeks to someone like your brother, mother, father."

At the same time, the e-commerce sites of brick-and-mortar retailers have struggled to

Latest Online Partnerships

>Wal-Mart and American Online: Offering discount Internet service; AOL promoted in stores; Wal-Mark.com advertised on AOL.

>Best Buy and Microsoft: MSN Internet access sold and demonstrated in stores; BestBuy.com advertised on MSN service.

>Circuit City and AOL: AOL sold and demonstrated in stores; CircuitCity.com advertised on AOL.

>Kmart and Yahoo: Creating free Internet access and shopping services at new site, BlueLight.com

>Radio Shack and Tandy: MSN sold and demonstrted in stores, RadioShack.com advertised on MSN.

keep up with the shift to on-line shopping. AOL and other Internet services lend the merchants online credibility while allowing them to be the first sites that subscribers see.

"It's like walking into a mall: You want them coming through your door before anyone else's," Wayne Hood of Prudential Securities says.

AOL did not announce the price of the discount Internet service - a customized version of AOL's CompuServe brand - but analysts believe it will be $10 to $15 a month. Hood says the free Kmart offering ultimately could force AOL to follow suit.

Meanwhile, experts say a slew of retailers, from Home Depot to the Gap, will link up with big Internet brands.

"This is just the tip of the iceberg," says analyst Zia Daniell Wigder of Jupiter Communications . For both Internet service providers and retailers, "If you don't do it, you're going to be left behind."---30--

The big news in the dot.com arena is that branding is crucial-----it takes a name and a sizeable amount of consumer mindshare to win eyeballs, and getting there is an expensive proposition. The days when a little startup could go it alone the way Yahoo and Amazon.com did are waning, and a new philosophy is taking hold: "If you are a small dot.com, you have to build alliances with other companies. You have no choice," says Philip Anderson, as associate professor at the Tuck School of Business at Dartmouth College in Hanover, New Hampshire. "You need to build share fast and that means you have to leverage your resources then you can get your mitts on by yourself."

Jim Datovech, 45, president of ComVersant, an e-commerce consulting firm in Gaithersburg, Maryland, adds, "Speed to market is critical today, and that is why alliances make so much sense. An alliance brings more strengths together."