America Online Europe, a joint venture between AOL and Bertelsmann AG, signed up its largest international ecommerce partner on Wednesday in an exclusive one-year deal. Online music retailer N2K will be its only music partner.
"This is the first of hopefully many relationships that we will be able to extend from our US business to our international business," said Jack Davies, president and founder of AOL Europe. "Maybe we can accelerate ecommerce in international markets this way."
Despite his company's patriotic-sounding American name, AOL Europe has, until now, prided itself on tailoring the content to each country it serves rather than simply translating American content into the local language. AOL currently offers local content in Germany, France, Japan, Canada, Britain, and sites are forthcoming in Hong Kong and Australia. Swedes, Swiss, and Austrians have access to AOL Europe, but there is no local content available for these countries.
AOL has 2.4 million European subscribers, including the 1 million the company gained with its recent acquisition of Compuserve's subscribers.
"It is wrong to import American content," Davies said. "It is important to be in the market, drinking the local water, to have [a] sense of what's going on in that environment." AOL Europe has tried to be down with the people, partnering with local newspapers and other content providers, online retailers, and Internet companies. Fleurop is the flower dealer for AOL Germany; Thomas Cook is the exclusive online travel agent on AOL UK. Their advertisers are local, too. When deals are made with companies like IBM, the negotiations are usually handled through the local offices.
"We want to be the Daily Telegraph of London, not USA Today," Davies said. But Davies' anticipation of more global partnerships indicates a move in a new direction. "The N2K deal is really a major milestone for us as we seek to build new revenue streams [in] international markets," he said.
And partner N2K is no greenhorn in the global economy. The company already has an alliance with AOL Japan and opened an office there simultaneously with its American launch. N2K also has deals with MTV in Europe, Asia, and Brazil, as well as local partnerships in France with publisher Grolier Interactive Europe and in Japan with NTT.
To further facilitate going global with AOL Europe, N2K is working with its American distributor MSI of Miami Corp. to open a distribution hub in Amsterdam and provide local titles. N2K CEO Larry Rosen claims that the deal will supply the company with 150,000 additional locally produced titles for the European market.
N2K will probably also follow AOL Europe's lead and open local offices. "In Japan, we have about 15 people working in the N2K office. That will probably happen in Europe as well," Rosen said.
But the AOL Europe-N2K deal is a bit surprising, in light of Bertelsmann's 50 percent interest in AOL Europe. The huge media conglomerate already owns a plethora of music and book publishing ventures, and has said that it is getting into the online book business as well. Davies contends, however, that the N2K partnership does not imply any conflict of interest.
"In all of our ecommerce, we evaluate the best possible partnerships," said Davies. "It is our feeling that the N2K relationship will bring the best overall value to our members. Bertelsmann does not offer a competing service. If they did, we certainly would actively consider them in the future. That was not an option at this point."
Financial terms of the N2K deal were not disclosed, but considering that N2K paid US$18 million last year in a deal to be the only music retailer on AOL's music area, it could be a hefty sum to reach AOL Europe's subscribers.
