Disney's brand power has kept its sites among the Web's top destinations. But the gulf separating those at the top of the heap from even the most successful also-rans has only widened since Go.com was launched. The company's decision to shut down the portal acknowledges the limits to how well consumer brands translate between the online and offline worlds.
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The Go.com site and Disney Internet Group were created through Disney's 1998 acquisition of a large ownership stake in Infoseek, one of the Web's first search engine portals. The idea was to create an umbrella brand and hub site for Disney's many online operations, building a base for competition with general-interest portals like Yahoo! (Nasdaq: YHOO), Microsoft's (Nasdaq: MSFT) MSN, and still-independent America Online's (NYSE: AOL) AOL service. Or so the theory went.
Things never ran smoothly, however, and Go.com (the new company's original name) had already experienced internal strategic conflicts and management shakeups by the time its namesake portal launched in January 1999.
After increasing its ownership in the company, Disney in November 1999 spun out Go.com as a tracking stock, a practice that, before the Internet bubble burst, was a popular option for established companies dabbling on the Web. Essentially a publicly traded accounting device, such stocks let companies enjoy the benefits of high-flying dot-com shares -- useful as currency for acquiring other firms and attracting employees -- while avoiding the disadvantages of carrying the scruffy, money-losing venture on their more-dignified balance sheets. And so another theory was put to the test.
Last October, Go.com's name was changed to Disney Internet Group following a repositioning to focus on entertainment, recreation, and leisure. Disney's latest decision to pull the plug altogether finds Go.com repositioned once again, this time as one of the Internet's more high-profile casualties.
Tragic Kingdom
"The competitive factors that initially compelled us to establish a separately traded class of common stock tied to our Internet operations have fundamentally changed," said Disney Chairman and CEO Michael Eisner in Monday's announcement. Despite shutting down Go.com, he said, the Internet will remain a central focus of the company's business strategy: "We believe this action should help us gain greater competitive advantage as we leverage Disney's creative content, brands and other assets."
Disney says it will continue operating and investing in its other online properties, including Disney.com, ESPN.com, NFL.com, and various ABC-branded sites, in a way that is consistent with its "long-held synergistic approach to all of its businesses." These operations will remain with the Disney Internet Group, which will continue to operate under its current management structure as a unit of the parent Disney company. Gone, however, will be attempts to force them under the branded Disney umbrella.
About 400 Disney Internet Group employees will be let go. That's about 19% of the division's 2100 employees, and about 0.33% of what Eisner called the Magic Kingdom's 120,000 "cast members."
A streamlined version of Go.com will remain online for a while to let current users transition, the company said. Some of the site's services will be migrated to other Disney sites: Go.com email will move to ABC.com. Disney is also looking to sell other Go.com assets, including the Infoseek search engine, which the company will also continue operating and supporting in the interim.
Disney will issue approximately 8.1 million new shares to take Disney Internet Group private, with each outstanding share of the subsidiary's common stock converted into 0.19353 shares of Disney common stock. The deal is expected to close on March 20, after which Disney shares will be the only common stock of The Walt Disney Co.
The limits of brand power
Among Go.com's most valuable assets may be the traffic that flows to its site, which can also be sold and redirected to the properties owned by the highest bidder. Yet traffic to the Go.com site has been more or less flat over the last year, and its overall reach, or market share, has been declining. In the end, that is probably what this story is most about.
The ubiquity and strength of Disney's family of brands has kept its sites among the Web's top destinations. But the gulf separating those at the top of the heap from even the most successful also-rans has only widened in the three years since Disney acquired Infoseek. And for all of the brand-power residing in the House of Mickey, the company's decision to shut down Go.com acknowledges the limits of how well consumer brands translate between online and offline worlds.
As a general-interest portal, Go.com never gained the traction necessary to compete with the Yahoos, MSNs, and AOLs -- all media newcomers by Disney's legendary yardstick, but arguably as entrenched in the online world as is Disney in the so-called old media world of television and film.
Also working against Go.com was the questionable idea of creating an umbrella site for an in-house family of brands, no matter how individually strong those brands may be. Rival Time Warner's Pathfinder, a pioneering online newsstand for Time Inc. magazines, had already been through several failed incarnations by the time plans for Go.com were being hatched.
Disney is, of course, entitled to make its own goofy mistakes, just as Time Warner, now hitched to AOL, is entitled to try the looney-tune approach again: The company reportedly plans to revive the umbrella approach and turn Netscape.com into a showcase for its various media properties.
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