KaKao

- Daum Acquires 100% Ownership of Lycos from Terra Networks for US$95 Million-
- Entry into Rapidly Growing US Internet Market, Take-off as Global Company-
- Synergy with Lycos 7th Ranked Brand Power and Daum“s Business Know-how-
- Localized, Personalized Community Service and Development of Lycos Search-
- EBITDA Turnaround Expected in 2005-

Seoul, Korea, August 2, 2004 - Daum Communications Corp. (KOSDAQ: 035720; www.daum.net), the largest South Korean Internet portal, announced its acquisition of 100% ownership of Lycos Inc. (www.lycos.com) from Spain?s Terra Networks, S.A. for US$95 million. Jae-woong Lee, CEO of Daum Communications Corp., and Joaquin Faura, Executive Chairman of Terra Networks, S.A., have signed the Stock Purchase Agreement on Saturday, July 31, 2004 to finalize the acquisition. The expenditure incurred in this deal will be appropriated by Daum?s current free cash (approx. US$58.6 million) and unsecured bonds (approx. US$75.3 million) issued on Wednesday, July 28, 2004.

Founded in 1995, Lycos has been the market leader in online search and online paid content services with its powerful brand recognition in US. Lycos“ main services and core competence are in search (Lycos and Hotbot), homepage/blog service (Tripod and Angelfire), financial information services (Quote.com), news content (Wired News), and personals service (Matchmaker). Revenue composition in FY 2003 is as follows: Display Advertising 29%, Paid-for-Performance and Paid-for-Inclusion 19%, Subscription Fee 29%, and Others 23%.

Through the acquisition of Lycos, Daum begins its initiative in global expansion with the entry into the rapidly growing US Internet market. With Lycos“ brand power and Daum“s Internet business know-how, Daum expects Lycos to increase its advertising and paid content revenues along with the continuous increase in traffic. Furthermore, the acquisition of Lycos“ strong brand awareness will ease Daum to prepare for future international investments. Especially, the online advertising market in US is rapidly growing, which creates optimism about Lycos“ fast turnaround in EBITDA in 2005.

According to Media Metrix (June 2004) and Fulcrum Analytics (April 2004), Lycos was ranked the 7th most frequently visited US property, recorded reach rate of approx. 30% in US, number of registered users amounted over 50 million, number of unique users amounted to 40 million, and the number of subscribers amounted to 170,000. Daum and Lycos will create synergy effect with Lycos“ strong brand power and Daum“s Internet business know-how by providing powerful mail and community service to drive traffic and increase revenue.

In addition, according to Universal McCann, Lycos“ market share in the online banner advertising market in US has rapidly increased from 2.4% in 2002, to 3.5% in 2003, and to 6.0% in 2004; total online banner advertising market is growing at a fast pace, expected to be US$6.5 billion in 2004, US$7.4 billion in 2005, and US$28.7 billion in 2015. Furthermore, the online search advertising market size is expected to be US$2.8 billion in 2004, US$5.6 billion in 2008. With the rapid increase in the market size, Lycos can expect significant revenue growth even if it maintains the current market share.

"Based on homepage/blog service and strong brand power of Lycos, Daum will apply the revenue generation model that has been proven in the Korean market"said Jae-woong Lee, President and CEO of Daum. "With the acquisition, Daum is ready to take-off in its globalization initiative with Daum“s experience in the Korean market and Lycos“ global network."

Daum“s main strategy in the US market is to localize its biggest advantage of community service and upgrade Lycos search. Through the improvement, Daum plans to enhance customer relationship and increase traffic, which can be monetized to a revenue generating application.

"Recently, the social networking service has been the hottest service in the US and the use of digital cameras and cell phone cameras are increasing along with the broadband penetration rate" said Kyu-cheol Jeong, Chairman of the Service Committee of Daum. "In this market environment, Daum will be able to successfully take advantage of its community business experience in Korea by providing users with personalized multi-media community service, a market which is in its nascent stage. The community service is one of our main strategies along with the development of the search service." According to Nielson NetRatings and SmithBarney, number of Broadband users in US has passed 42.1% in 2003 and is expected to be over 50% of total Internet users in US.

Service development plans for the upcoming year are personalized individual community service development; reformation of Lycos mail; enhancement of search service with the introduction of “Q&A“ and “Search Jockey,“ which proved successful in Korea.