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Friday, 03/26/2004 7:57:21 PM

Friday, March 26, 2004 7:57:21 PM

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Yahoo buys European comparison site for $574 mln
CBS MarketWatch

LONDON - Internet portal Yahoo on Friday said it was buying Kelkoo, Europe's leading price comparison-shopping site, for around 475 million euros ($574 million) in cash.

Kelkoo earns commissions from merchants for click-throughs, or customer referrals. Its product search engine compares prices from 2,500 merchants in categories that include books, music, travel and consumer electronics.

The deal could also bring Yahoo into a potential conflict with rival Microsoft . Microsoft's MSN Internet portal has had a pan-European referral agreement with Kelkoo for about a year.

The "vast majority" of Kelkoo's revenue and traffic stem from visits from its own sites in 10 European countries, but MSN is its largest outside referral partner, said Pierre Chappaz, chief executive officer and founder of Kelkoo, in an interview.

He said he's not expecting any change to the MSN relationship.

A spokesman for MSN in London said the Microsoft portal division also isn't anticipating any change to the relationship, which is based on sharing revenue from referrals. "Our partnership with Kelkoo is still in place and there's no change at all," he said.

Yahoo shares were up 19 cents, or 0.4 percent, to $47.13.

Sales last year surged to 42 million euros, up 170 percent on the year. Earnings totaled 11 million euro. Kelkoo has been profitable since the fourth quarter of 2002, Yahoo said.

Yahoo expects to complete the deal in the second quarter of 2004.

The acquisition is a way for Yahoo "to reach more people (and offers) more ways to make our services more useful," said John Marcom, Yahoo's senior vice president international operations. For now, Yahoo has no plans for a re-branding, he also said.

"We'll look for the appropriate ways to link it with Yahoo, if it makes sense," he said. "Kelkoo markets itself extremely well and they are very good at it."

Consumer electronics, led by digital cameras and DVDs, are its largest category, Chappaz said. The U.K. is its biggest market, with with over 13 million unique users per month, the Kelkoo website says.

For its part, venture capital backed Kelkoo decided to link with Yahoo instead seeking an initial public offering to back an expansion. An IPO was one of its options, Chappaz noted.

"The product search markets were really becoming a world-wide market," he said. "We are pragmatic people; we couldn't become the worldwide leader alone... This is why we have been looking at partnering with Yahoo."

Yahoo said it isn't anticipating any job cuts; Kelkoo currently employs around 250 people in Europe. Yahoo shares ended up 5.5 percent Thursday at $46.94.

VC backers in Kelkoo since its creation in 1999, include Banexi Venture Partners, Sgam (Societe Generale) and Innovacom from France, Netjuice and BBVA from Spain, and Kistefos from Norway.

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