By: Jennie L. Phipps

CMGI May Place Newspaper Group Under Different Umbrella

by Jennie L. Phipps

Zip2, the popular Web directory software on which about 160 newspapers
rely, may undergo yet another corporate change., the CMGI Inc. company that acquired Zip2 last January, is
apparently on the selling block after failing to become a household
name or move toward profitability.

Meanwhile, Zip2 has had better financial fortunes, and according to an
internal memo made available to E&P Online, will remain a CMGI company,
albeit potentially under another umbrella.

The memo makes a distinction between MyWay East, which is the portal
business that last December partnered with Bell South to develop a
personalized portal for its 700,000 Internet customers, and MyWay West,
which is the old Zip2 division. Zip2 provides online Yellow Pages,
community publishing and e-commerce solutions for newspapers.

In announcing the decision internally, CMGI said it was considering
selling MyWay East outright or seeking a strategic partnership to make
a capital investment. If neither of those strategies are possible, then
CMGI says it will consolidate MyWay East with MyWay West and
concentrate the division’s energies on the Zip2 line of business.

CMGI concludes that Zip2 is a profitable market leader with steadily
climbing revenues. It points specifically to a customer base that
includes major newspaper publishers like The New York Times and
The Washington Post, as well as a growing clientele among
telephone companies, both in the U.S. and abroad, eager to move into
the online publishing business.

David S. Marshak, a senior vice president at Patricia Seybold Group,
who authored a research report on e-commerce software, said MyWay East
(the portal portion of the business) is competing in a space where
ISPs, hardware manufacturers such as Dell and Compaq, and search
engines like Yahoo! have already staked big claims. He points out that
newcomers to the Web are different than pioneering Internet users in
that they are less computer savvy and unlikely to dump the home page
that somebody else installed. This, of course, makes it harder for
MyWay East to grow and be profitable without moving into a niche
position, which is where MyWay West/Zip2 is already established.

Officials at the MyWay East division and CMGI would not comment on the
future of MyWay. Recently, CMGI’s stock has been at a low, dropping
from a 52-week high of $163.50 on Jan. 3, to a 52-week low of $33.13 on
Aug. 3. Shares are currently trading at about $40.

Zip2 boosts customer service

Edward S. Wolyniec, vice president and general manager of the Zip2
division, confirmed that Zip2 isn’t for sale. ‘I run the West business,
and I’m not the guy to be talking about what’s going on in the East,’
he said. ‘Zip2 is a valuable part of the CMGI family.’

Wolyniec said the company has recently made major upgrades to its
Homebase software. The new 2.1 version allows online newspapers to rank
user search results based on what advertisers spend. For instance, a
restaurant whose package includes menus and a photo of the owner would
come up on a default search before one who bought a less-elaborate

Zip2 is also partnering with to give newspapers more Yellow
Page sales options, including the ability to sell clients their own
mini-directories. For instance, an apartment complex might like to
brand a directory for tenants, sending them to nearby merchants and
also offering service information.

Wolyniec joined Zip2 more than a year ago from Compaq, which briefly
owned Zip2. ‘I’ve been methodically overturning bad customer
relationship vibes,’ Wolyniec said. In the past, Zip2 clients have
complained about the company’s lack of direction.

Wolyniec said that when he arrived, there were four people servicing
newspaper accounts. Now, there are 25, plus a team of account managers
where previously there were none.

‘I still have a ways to go with some of our customers, but I think
overall, we are much improved,’ Wolyniec said. ‘We’re really focused on
doing the right thing. These are customers that we want to do business
with for life.’

Ian Murdock, director of digital media at Hearst Newspapers and a
volunteer member of the Zip2 customer advisory panel, credits Wolyniec
for trying hard. ‘I also believe that internally at CMGI, they know
that if Zip2 is going to continue to be profitable, they are going to
have to resource them properly,’ Murdock said.

But Murdock is not convinced that Zip2 has reached a satisfactory level
of customer service. ‘Throwing people at a problem is one thing;
execution is something else. They’ve made the commitment; now they have
to actually do it.’


Jennie L. Phipps ( is an independent writer and editor
based in Farmington Hills, Mich. She writes frequently for E&P Online.

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