Homestore, AOL settle marketing dispute

Zardon · Jan 10, 2003, 09:50 PM

REAL ESTATE SITE operator Homestore has settled a contract dispute with America Online (AOL) over a marketing pact the companies forged three years ago, agreeing to pay the Internet service provider (ISP) $7.5 million to terminate the deal.

In conjunction with the settlement, announced Thursday, the companies have also formed a new, 18-month marketing agreement, in which Homestore will exclusively provide AOL with residential real estate content.

News of the settlement and newly-minted agreement sent shares of Homestore (HOMS) soaring about 41 percent Friday to $1.33, despite the fact that a former executive with the real estate site pleaded guilty to securities fraud earlier this week.

Both AOL and Homestore are the subjects of federal probes over allegations that they have artificially inflated advertising revenue figures, and their previous relationship has been among the pacts federal prosecutors have been examining.

But despite their tenuous partnership, the companies have decided to jump into bed again, throwing aside the previous dispute over AOL's adherence to their contract obligations.

As part of the new agreement, Homestore has exclusive rights to provide AOL with real estate listings and professional content through June 2004. In turn, AOL will offer increased promotion and more prominent integration of Homestore's content in a redesigned real estate area on the AOL service. The companies said that they will continue to share advertising revenue in the home-related categories and Homestore will make quarterly cash payments to AOL of $3.75 million, totalling $22.5 million for the duration on the contract.

The new marketing deal comes as AOL is looking high and low for new revenue possibilities.The ISP has fallen on rough times given the evaporating online ad market, slowed subscriber growth and the continued weak state of the economy.

With little relief in sight, AOL is planning tough cost-cutting measures. Speaking at a Salomon Smith Barney media conference in La Quinta, Calif., on Thursday, Wayne Pace, chief financial officer of AOL parent company AOL Time Warner (AOLTW) told analysts and investors that AOL will have a "relentless and continuing focus on cost management."

Further details of AOL's financial status are expected to be given when AOLTW reports its 2002 full-year and fourth-quarter results Jan. 29.

Shares of AOLTW (AOL) traded up 2.86 percent to $14.74 Friday. By Scarlet Pruitt

Jan 10, 2003, 09:50 PM	#1
Zardon DriverHeaven Founder Join Date: May 2002 Posts: 32,480 Rep Power: 177	Homestore, AOL settle marketing dispute REAL ESTATE SITE operator Homestore has settled a contract dispute with America Online (AOL) over a marketing pact the companies forged three years ago, agreeing to pay the Internet service provider (ISP) $7.5 million to terminate the deal. In conjunction with the settlement, announced Thursday, the companies have also formed a new, 18-month marketing agreement, in which Homestore will exclusively provide AOL with residential real estate content. News of the settlement and newly-minted agreement sent shares of Homestore (HOMS) soaring about 41 percent Friday to $1.33, despite the fact that a former executive with the real estate site pleaded guilty to securities fraud earlier this week. Both AOL and Homestore are the subjects of federal probes over allegations that they have artificially inflated advertising revenue figures, and their previous relationship has been among the pacts federal prosecutors have been examining. But despite their tenuous partnership, the companies have decided to jump into bed again, throwing aside the previous dispute over AOL's adherence to their contract obligations. As part of the new agreement, Homestore has exclusive rights to provide AOL with real estate listings and professional content through June 2004. In turn, AOL will offer increased promotion and more prominent integration of Homestore's content in a redesigned real estate area on the AOL service. The companies said that they will continue to share advertising revenue in the home-related categories and Homestore will make quarterly cash payments to AOL of $3.75 million, totalling $22.5 million for the duration on the contract. The new marketing deal comes as AOL is looking high and low for new revenue possibilities.The ISP has fallen on rough times given the evaporating online ad market, slowed subscriber growth and the continued weak state of the economy. With little relief in sight, AOL is planning tough cost-cutting measures. Speaking at a Salomon Smith Barney media conference in La Quinta, Calif., on Thursday, Wayne Pace, chief financial officer of AOL parent company AOL Time Warner (AOLTW) told analysts and investors that AOL will have a "relentless and continuing focus on cost management." Further details of AOL's financial status are expected to be given when AOLTW reports its 2002 full-year and fourth-quarter results Jan. 29. Shares of AOLTW (AOL) traded up 2.86 percent to $14.74 Friday. By Scarlet Pruitt