Telefónica to Settle $675m Ad Shortfall at Terra Lycos

04 November 2002

Spanish telecoms giant Telefónica plans to rescue its internet portal subsidiary Terra Lycos should a huge ad deal with German media giant Bertelsmann fall through.

At the height of dotcom fever in 2000, Bertelsmann signed a $1 billion (€1bn; £0.6bn) agreement to buy advertising on Terra Lycos and paid a first instalment of $325m – making it the portal’s biggest advertiser.

The period covered by that initial payment ran out last week, and – in a substantially different environment for internet advertising – Bertelsmann is reportedly giving serious thought to cancelling the final three years of the deal, worth $675m.

In the 2000 contract, Telefónica, owner of 37% of Lycos, agreed to make up the difference should Bertelsmann pull out – an obligation the telecoms firm intends to honour.

Lycos informed regulators last week that its parent would “acquire products and services from the Terra Group for the amount not contracted by the Bertelsmann Group up to a maximum amount of $675m.”

Data sourced from: New York Times; additional content by WARC staff