AOL and Wal-Mart Make Monster Deal Official

America Online and Wal-Mart Stores announced a wide-ranging strategic alliance today that will create a new co-branded online service and numerous cross-marketing initiatives between the two companies.

The announcement comes just one day after AOL entered a marketing alliance with electronics retail giant Circuit City and Kmart entered into similar alliance with giant Web portal Yahoo!.

Reaching Untapped Markets

“It’s always been a key priority for us to be everywhere our customers are, and with new segments of the mass market coming online, there’s no better way to do that than work with Wal-Mart,” said AOL President and Chief Operating Officer Bob Pittman. “This relationship provides us with a great opportunity to introduce new users to all the benefits of the Internet and enrich the experience of all online consumers.”

Lee Scott, Wal-Mart’s Chief Operating Officer and Vice Chairman, also believes that the partnership represents a win for consumers.

“We are taking this step to benefit our customers. Millions of our customers will be enabled by this agreement to obtain affordable, convenient Internet service, and to access our online store. The combination of Wal-Mart’s affordable online offerings and AOL’s reach to over 19 million households represents a significant opportunity for value-conscious Americans.”

Much Needed Deal

AOL badly needed this deal, both to establish a brick-and-mortar presence and to offset Microsoft’s stunning deal with Tandy Corp.’s Radio Shack to promote its online service in the electronics chain’s 7000 locations.

In fact, many observers thought that Microsoft had been trying to nix the deal by wooing Wal-Mart behind the scenes.

Customers Provided Software In-Store

For Wal-Mart, the deal will jump-start its lackluster foray into e-commerce. Under the agreement, Wal-Mart customers will be able to pick up the software for the new online service at many of its 3,600 brick-and-mortar locations.

In return, Wal-Mart.com will have a prime cyberspace in the Shop@ areas across all of AOL’s brands. A redesigned Wal-Mart.com will also be introduced January 1st and offer an expanded roster of products and services that will be available to Wal-Mart.com users as well as AOL subscribers.

As part of the alliance, Wal-Mart will also promote the Wal-Mart/AOL co-branded online service and the AOL branded online service through print, radio and television advertising, and in-store promotions.

Additionally, the companies said they will be exploring the most effective means to market a full range of next-generation interactive devices and services — such as AOL TV — in order to appeal to Wal-Mart customers.