Collaboration between Israel's Internet portals is widening. Sources inform ''Globes'' that Nana10 and Microsoft's MSN Israel have signed an memorandum of understanding (MOU) for a strategic merger for sales and content sharing. The goal is to create a leading portal and an attractive advertising asset that can compete against Israel's two dominant portals, Walla Communications Ltd. (TASE: WALA) and "Yediot Ahronot's" ynet.
The sources added that the shareholders of both Nana10 and MSN Israel have approved the deal, but that it still needs the okay of the Antitrust Authority. If permission is granted, the collaboration could begin in early 2010.
Under the proposed deal, the sales departments of Nana10 and MSN Israel will be consolidated, with one unit serving both portals. Sources close to the deal said that the consolidated department will try to exploit its economies of scale and the fact that Messenger and Hotmail offer brands a segregated advertising tool; the merger will enable the portals to offer advertisers a single advertising package that includes advertising on both portals. The consolidation will reportedly result in job losses, although not many.
Under the agreement, which will be based on combining Microsoft technological assets and Nana10's content, which includes the airing of Channel 10 television content. Both portals will keep their own homepages; the objective is to target the two portals' different audiences. Nana10 content will be included and promoted by MSN Israel and Messenger, while Microsoft's Hotmail e-mail service and Messenger will be presented on Nana10.
The comScore Inc. (Nasdaq: SCOR) survey for October found that 1.8 million surfers visited Microsoft websites and services in Israel, including MSN Israel, Hotmail, and Messenger. 1.6 million surfers visited Nana10 in October.
comScore reports that, excluding overlaps in target audiences, a strategic merger by MSN Israel and Nana10 will create a joint portal with 2.9 million visitors a month, more than the 2.8 million monthly visitors at Walla! and 2.2 million visitors at ynet in October.
Although both MSN Israel and Nana10 appear to target the same audience youths - the two portals discovered during their negotiations on the deal that the level of overlap between their audiences was quite low. Nana10 is very popular among teenagers, mainly because of its Nana Games platform, while MSN Israel is largely based on users who never bothered to replace their homepage, and mainly comprises older users who keep MSN as the default homepage. In addition, 1.6 million users visit Messenger, 54% of whom are over 20.
Even if the overlap between users is larger than comScore estimates, a strategic merger between the portals could become a pretty good alternative to Walla! and ynet, which reportedly control 70% of the Israeli online advertising market. A joint MSN Israel-Nana10 entity would have two target audiences, which will result in a large weekly exposure rate among users aged 15-34, the prime target audience for advertisers.
Published by Globes [online], Israel business news - www.globes-online.com - on November 25, 2009
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