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The Kelsey Report® Advisory

Switchboard to Anchor AOL's YP Services
Charles Laughlin,Daniel N. Miller , 12/19/2000

Issue: AOL and Switchboard's Reunion Changes the IYP Landscape

News: America Online and Switchboard.com announced a four-year agreement whereby Switchboard will provide the Yellow Pages database and technology to power a new push by America Online to leverage its local opportunities. Under the agreement, Switchboard will pay AOL an initial $13 million, followed by an equal payment by March of 2002. In addition, Switchboard has granted 746,260 shares (representing 3 percent of its outstanding shares) to AOL. As the relationship develops, AOL can acquire up to 15 percent of Switchboard (inclusive of its current holdings).

In return, AOL will pay Switchboard a $2 million fee, and Switchboard will be given the larger share of the first $35 million the deal generates. The two will build a local sales effort to sell a broad suite of local advertising and electronic commerce services that are "powered by Switchboard." In a call with analysts Tuesday, Switchboard executives characterized the revenue opportunity as being in the "hundreds of millions" based on capturing just a small fraction of the $13 billion North American print Yellow Pages industry.

The deal covers AOL's Netscape and CompuServe units, but does not cover the main AOL properties - AOL.com, Digital City and the proprietary AOL service. Verizon SuperPages continues to operate as AOL's Yellow Pages partner for those properties.

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