German media giant Bertelsmann is having second thoughts about a $1 billion (£0.7bn; €1.14bn) ad deal forged in May 2000 with the online portal of Barcelona-headquartered Terra Lycos.

Under the five-year agreement, Bertelsmann agreed to pay $325 million by October this year for “advertising, placement and integration services from Terra Lycos”, with an optional further payment of $675m thereafter.

However, it is set to slim the second payment considerably. “One billion dollars is a lot, particularly since the price for advertising has decreased so dramatically,” the German group said.

“We will decide over the next months if and for which amount we will continue after October 2002. It will definitely be much less than the $675m.”

A reduction in Bertelsmann’s spend could be disastrous for Terra Lycos, which gains around one-third of its media revenues from the German giant. However, the online firm insisted that its parent, Spanish telecoms company Telefonica, would make up any reduction in Bertelsmann’s adspend.

Data sourced from: Financial Times; additional content by WARC staff