Lycos revenues tumble by a third

The weak advertising market and the loss of a long term advertising deal with German media giant Bertelsmann has led to revenues plummeting by more than a third at pan-European internet service Lycos.

The company, a joint venture between Bertelsmann and US internet company Lycos, said revenues had fallen by 35% year-on-year in the first quarter of 2003 to £14.6m.

It blamed the weak online advertising market, costs associated with the sale of loss-making companies and the loss of a lucrative advertising agreement with Bertelsmann in October last year, when the German company scaled back its own internet operations.

However, as a result of cost-cutting and improved revenues from paid-for service, operating losses narrowed from to £11.4m from £16.3m the previous year.

The company, which operates high-profile sites across 10 European countries including the UK, last year shifted its focus to concentrate on community features, including its popular Love at Lycos dating site, its search engine and web page creation arm.

Through its renewed focus on community features, which attract more than 25 million users a month across Europe, Lycos hopes to increase the amount it earns from paid-for services.

The managing director of Lycos UK, Alex Kovach, told MediaGuardian.co.uk recently that the changes were having the desired effect on the UK site, with users visiting more often and for longer.

In common with Yahoo! and other major internet portals, Lycos is determined to increase the amount it makes from its users for subscription services.

The Lycos chief executive, Chris Mohn, said the company's aim was to increase revenues from paid-for services to £70m within three to five years.

"Adjusted for the sale of Massmarket we succeeded in increasing our paid services and shopping revenues by 77% in the first quarter of 2003 compared to the same period last year. We are therefore convinced we are on the right track for achieving our strategic goal within the next three to five years," he said.

Lycos, remembered for ads featuring a dog fetching a bone, has endured the same rollercoaster ride as the other major internet portals that rose to prominence during the dotcom boom.

But analysts have repeatedly questioned whether it has the scale to survive alongside US giants such as Yahoo! and Microsoft's MSN.