Partnerships and Alliances

views updated

PARTNERSHIPS AND ALLIANCES

Businesses continually form strategic alliances and partnerships with other firms, many times competitors, for a variety of reasons such as growing product and service offerings, gaining access to new markets, and working together on new product developments. The motivation behind alliances and partnerships in the e-commerce arena includes gaining access to cutting-edge technology, building content offerings on a Web site, and attracting more online visitors. In fact, many of the leading e-commerce players owe their dominant positions to successful alliances and partnerships.

Yahoo! is the world's busiest Internet portal, with more than 100 million visitors every month. The reason for the site's intense level of traffic, according to Advertising Age, is co-founder Jerry Yang's efforts to create a "destination where Web surfers could get whatever they wanted from the site's personalized content, e-commerce offerings, special promotions, and other interactive data." Yang did this by continually forging alliances with companies as a means of offering new products and technology to users. For example, Yahoo! diversified into Internet access services a few years after its inception by teaming up with AT&T Corp. to offer Internet access through AT&T's WorldNet Service. A 1999 alliance with Motorola Inc. allowed Yahoo! to expand into wireless Internet service. Another deal with TIBCO Software Inc. allowed the firm to launch Corporate My Yahoo! in its first attempt to target corporate clients. In November of that year, Northpoint Communications and Yahoo! began jointly promoting broadband services such as digital subscriber line (DSL) to residential and business Internet users. Kmart Corp., SOFTBANK Venture Capital, and Yahoo! worked together to launch BlueLight.com, a free Internet access service, in December. The following year, Yahoo! partnered with growing online search engine operator Google Inc., agreeing to make Google.com its default search results provider.

Internet service provider (ISP) Earthlink used alliances and partnerships in an effort to reach its goal of becoming the largest independent ISP. For example, in August of 1995 the company greatly expanded its service area via a deal with UUNET Technologies. According to the terms of the agreement, Earthlink was able to use UUNET dial-up access numbers to offer service in nearly 100 U.S. cities. In February of 1998, the firm combined its ISP services with those of Sprint Corp. As a result, Earthlink strengthened its position in the ISP market and gained access to Sprint's extensive base of customers. The firm also convinced Apple Computer to use Earthlink software as the default Internet access application on its newly launched iMac computer. In similar deals, both Packard Bell and NEC Ready Computers made Earthlink the default ISP on their computers in late 1998, just in time for the upcoming holiday season. These partnerships—the most successful in Earthlink's history—secured more member sign-ups than any other marketing promotion to date. A similar alliance with U.S. computer retailer CompUSA made Earthlink the chain's official ISP, giving Earthlink access to CompUSA's customer base and inclusion in CompUSA advertisements.

With more than 1 million customers by the start of 1999, Earthlink continued to pursue alliances aimed at growth. In 2000, Sprint allowed the company to use its DSL network to offer high-speed Internet access to customers for the first time. In addition, Earthlink and UUNET jointly launched nationwide DSL access to consumers, and both Micron Millenna and Phoenix Technologies added Earthlink software to their new computers. Continuing to diversify its services, Earthlink partnered with Hughes Network Systems in November 2000 to offer high-speed satellite broadband services to those in rural areas. The following month, rival America Online (AOL) agreed to permit Earthlink to use AOL and Time Warner cable lines to offer additional high-speed services to its members.

Internet retailing giant Amazon.com also relied heavily on partnerships and alliances to reach a dominant position in the world of e-commerce. Hoping to fuel growth, one of the firm's first moves was the creation of its "associates" program in July of 1996. This program allowed individual Web site owners and operators to partner with Amazon by including links to Amazon on their site. Associates received a commission each time a Web surfer who clicked on the Amazon link actually purchased a book. In 1997, Amazon created alliances with AOL and Yahoo Inc., both of which resulted in Amazon's promotion on these high-traffic sites. By the following year, the associates program had reached 30,000 members, and it continued to grow rapidly throughout the remainder of the decade. According to Fortune columnist Eric Nee, Amazon "helped gain dominance and bolster its brand name by signing up 200,000 'associate' Web sites that refer customers to Amazon in return for a share of the revenues."

Ameritrade, the fourth-largest Internet-based brokerage in the United States, also used alliances to grow its service offerings in the late 1990s. The firm expanded its reach in 1997 by convincing AOL to include links on AOL.com to Ameritrade's Accutrade and Ceres sites. The firm struck a similar deal with Microsoft, which agreed to furnish users of the Microsoft Investor program with online access to both financial services. Additional alliances that year included deals with Yahoo! Finance, Excite Business & Investing, and Infoseek Personal Finance. Thanks to a partnership with Data Broadcasting, Ameritrade was able to offer stock quotes via the Internet for the first time in 1998. An additional partnership with PostX allowed Ameritrade to also make trade confirmations online. Along with reaching out to U.S. partners, the company also began pursuing deals with international partners, including France-based discount broker Cortal and Deutsche Bank AG.

Adobe Systems Inc., a leader in Web authoring tools and other Internet publishing technology, got its first big break in the mid-1980s when Apple Computer Inc. agreed to use Adobe's PostScript printer language with its LaserWriter printer. As part of the partnership, Apple purchased a 19-percent stake in Adobe. Via a similar deal, Texas Instruments Inc. began using PostScript in its IBM-compatible PCs in 1986. In 2000, well after Adobe had successfully transformed itself from a desktop publisher into an Internet publishing tools vendor, the firm began seeking strategic alliances as a means of staying abreast of cutting-edge Internet publishing technology. For example, in the second half of 2000, Adobe integrated its GoLive software with WebTrends Corp.'s Web tracking technology. As a result, clients creating Web sites with GoLive were able to monitor things like site traffic.

Discount travel site Priceline.com is an example of an e-commerce venture that simply would be unable to function without alliances and partnerships. To begin operating its name-your-price site, the dotcom had to convince major airlines to agree to sell their extra tickets on Priceline.com. Although the site offered airlines a way to fill some of the 500,000 seats left empty each day, at first many airlines proved reluctant to partner with an Internet upstart. Initially, only TWA and America West signed deals with Priceline. It wasn't until the firm recruited an experienced management team that Delta Airlines signed on. Eventually, Northwest and Continental followed suit. Additional alliances with United Airlines, American Airlines, and US Airways allowed Priceline to increase its offerings in November of 1999. Deals with A&P, ShopRite, Stop Shop, D'Agostino's, Key-Food, and other grocery stores formed the basis for a name-your-price online grocery service called Priceline WebHouse Club, established in 2000. Diversification into new product areas is dependent upon alliances with businesses willing to participate in an online name-your-price venture.

Some companies form alliances and partnerships in an effort to impact an entire industry. For example, IBM Corp. and Nokia Corp., the world's largest cell-phone manufacturer, forged an alliance to hasten the growth of the wireless Internet in 1999. The two companies agreed to work together to develop enterprise wireless application protocol (WAP) solutions that would allow customers to immediately begin extending e-business beyond the PC to a variety of mobile devices. With cellular phone markets nearing saturation in many nations, Nokia had started looking to the Internet as a way to ensure future sales, believing that wireless devices would replace PCs as the most popular method for accessing the Internet. IBM also was hoping to bolster its foothold in what looked to be a promising new market. Alliances and partnerships likely will continue to play an important role for e-commerce firms, impacting the performance of individual businesses, as well as the development of various industries.