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AOL, Time Warner Enter Web Deal With InStyle

November 16, 2000|EDMUND SANDERS | TIMES STAFF WRITER

WASHINGTON — America Online Inc. and Time Warner Inc. said Wednesday they will launch a luxury-oriented e-commerce site featuring fashion advice and beauty tips from InStyle.com, a unit of Time Inc.

The venture is the latest example of how the Internet and entertainment giants are integrating their businesses before the federal government signs off on their merger.

Dulles-based AOL, which debuted the new service Wednesday on its proprietary online shopping mall, Shop@AOL, said the deal will beef up its e-commerce presence in anticipation of another strong holiday season for online retailers. Company officials said the site complements AOL's "bargain basement" shopping mall, launched this year.

"Our demographics line up very well with the upscale market," said Patrick Gates, vice president of AOL's e-commerce unit. AOL members have spent nearly $14 million online this year, the company estimated.

AOL and Time Warner, seeking government approval to merge their companies by year-end, are eager to demonstrate to investors that they can effectively combine their online and offline operations. For example, AOL recently began hawking subscriptions to Time magazine via its online service, while the New York-based magazine has been inserting AOL sign-up disks in its pages.

"This is another example of the kind of revenuesynergy and cross-promotion that is key to the merger," said Scott Reamer, analyst at SG Cowen Securities in New York.

He said the new shopping site should give AOL and Time Warner an edge in attracting luxury-goods advertisers, who have been skeptical about using the Internet to reach buyers and worry about tarnishing their brand by partnering with an unfamiliar "dot-com."

Terms of the InStyle deal were not disclosed, but Gates said InStyle did not receive any special consideration in negotiating the partnership.

InStyle magazine, launched by Time Inc. in 1994, offers celebrity-driven articles for women, ranging from where to buy eyeglasses worn by "Charlie's Angels" star Lucy Liu to how to apply nail polish. AOL plans to use InStyle's content to enhance a luxury-oriented shopping site, anchored by SaksFifthAvenue.com and BestSelections, an online network of upscale boutiques.

Over the last month, AOL has also signed contracts with Restoration Hardware, Macy's and Bloomingdale's.

The deals demonstrate that retailers remain eager to win access to AOL's 25 million subscribers, though analysts note that Internet companies such as AOL are no longer commanding the same kind of premiums they once did.

"The prices that retailers are willing to pay for these deals is down significantly," said Jill Frankle, director of retail e-commerce at Gomez Advisors, an online consulting firm.

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