The Ultimate Guide to Internet Deals

Companies that hope to do deals in quantity also need to send clear signals -- to their own people and to the outside world -- that they are an open system. "You have to immerse your employees in the notion that you win by working with other companies, not by going it alone," says Jordan. "And people outside the company need to know that the welcome mat is out. We take meetings with a lot of little companies -- outfits with just two or three people -- because it wasn't that long ago that we were that size. You need to cast a wide net, because this is a big ocean. You can't count anyone out."

"Anyone" includes even Microsoft, which produces its own streaming-media player and which is RealNetworks's foremost competitor. At one point, Microsoft had invested $30 million in RealNetworks, but the software giant divested itself last year, and the two companies are now battling over technology standards. Still, in the Internet business, a company must never say never.

"MSNBC is the only major news site that doesn't use either RealAudio or RealVideo," says Mark Hall, 35, general manager of media publishing at RealNetworks. "But we would definitely be prepared to take on the MSNBC site as a content partner. It has some great programming."

Hall oversees many of RealNetworks's content partnerships. "You want to have a system that's scalable and efficient, because you're dealing with tens of thousands of sites," he says. "The simpler you keep the partnership, the faster lawyers can get through it." Indeed, the standard agreement between RealNetworks and one of its content partners is only three pages long. Under this agreement, no money changes hands: RealNetworks provides technology, offers support services, and helps distribute programming to its audience of 55 million; the partner simply agrees to provide a channel of daily content in the RealNetworks format.

"We've done deals in two or three days, and usually we do them in no more than two or three weeks," Hall boasts. Unlike the iron-clad agreements of the old economy, though, RealNetworks's content partnerships seldom remain unchanged for longer than two years -- and, in fact, one year is the norm. "You don't want deals that prevent you from being flexible and nimble," says Hall. "Change is what the Net is all about."

Avoiding long-term contracts doesn't mean becoming a shortsighted company. Maria Cantwell, 40, senior vice president of the consumer and e-commerce division at RealNetworks, agrees that lengthy and exclusive contracts often work against a deal. But, she argues, nimbleness and flexibility shouldn't keep you from sharing your vision of the industry's future with your partners.

"You need to identify opportunities in which you can build alliances that involve more than just one deal," says Cantwell, who served as a member of Congress from Washington State before she joined RealNetworks. "For example, we try to think, What are the long-term benefits if America Online and RealNetworks work together? Will a deal with AOL help us build the market for streaming media? How do we work together in the future, now that all 15 million AOL subscribers can easily gain access to RealPlayer?"

Cantwell is fond of comparing deal making on the Internet to what takes place in the halls of Congress: "In the technology world, you benefit from cutting to the chase -- being up-front about your common interests. Email and the Web let you share information and find common ground quickly. Technology accelerates the exploratory phase. Once two companies decide that they're in sync, people here really want to do deals. In politics, though, you never know when you're going to need people again, so you focus on building coalitions, building trust, and then working out the details. You're also more fearful of a failed negotiation than you are in the Internet space. Politics is such a public arena: You're always thinking, What will the media say?"

III. What's the Deal with Talent?

Bert Ellis, chairman and CEO of iXL, oversaw a mind-blowing 34 acquisitions from 1996 to 1998. Bill Nussey, president of iXL, took part in about 20 of those deals. But the two men deny that they're pursuing an old-fashioned roll-up strategy (one that involves trying to dominate a decentralized industry by assembling a bunch of far-flung assets). Instead, they're simply trying to build the Web's premier design, development, and engineering firm. "This isn't a financial roll-up," Nussey claims. "This is a talent roll-up." The goal behind iXL's acquisitions, he says, is to build a big team of talented people -- and to build it fast. "Our acquisitions are a way of hiring a lot of people, while reducing the risk that they won't be able to work together. We know that they can work together -- they've already done it."