Microsoft, Infoseek deal bit of a puzzler

At first it's a little puzzling as to why Microsoft has done a deal with Infoseek to provide search and directory services for WebTV, which gives Internet access to television viewers who have the necessary additional box. Infoseek will pay Microsoft $26 million for a two-year deal (it's that way round because of the revenue from advertising that Infoseek will get). Infoseek's shares jumped nearly 10 per cent on the news, because of a guarantee that Infoseek will get 4.5 billion views during the deal, keep the first so-much (undisclosed) of advertising revenue, and split subsequent revenue with WebTV. The official explanation from James Aguilar of WebTV as to why Microsoft did not use its own bought-in Inktomi search engine was that "The search offering from Infoseek is available for our customers today, while Microsoft's offering is still in beta." It was surprising that Microsoft PR allowed the hint that it will be a long beta for Microsoft's engine. The second surprise was just how independent WebTV seems to be from Microsoft. This hands-off approach to WebTV is unexpected in that close Microsoft involvement at least in marketing was thought to be the only way for Microsoft to make WebTV successful. Consequently, Infoseek's cash is important to a quasi-independent WebTV. In a complex deal in June, Disney acquired 43 per cent of Infoseek. ®