Discover Financial Services Inc. has struck a deal with an Internet directory service to help smaller merchants establish World Wide Web sites and drive traffic to them.

Under the arrangement with Switchboard Inc., Discover merchants can pay $40 to $50 a month for a basic Web site. Switchboard will design and maintain the site, which would include such information as driving directions to the store, names of people there, and product descriptions.

Switchboard will also display an on-line ad for the store to Web surfers who searched for related or nearby businesses.

Switchboard, a division of Banyan Systems Inc. of Westborough, Mass., operates an on-line directory of yellow- and white-pages-style information. The service processes more than 40 million Web searches a month.

Discover, a Riverwoods, Ill., subsidiary of Morgan Stanley Dean Witter & Co., has mainly focused on giving cardholders incentives to do business on the Web. Now it is turning its attention to retailers.

"We want to do things to help merchants get more business, and the Internet is certainly in the space where we want to do that," said Tom Dailey, senior vice president of Discover Financial Services. "It seemed natural that we would partner with somebody who could help them generate more sales."

The arrangement gives Switchboard a way to expand its advertising base and sell the Web-page services offered by Banyan.

"We wanted to attract organizations like Discover that have trusted relationships with local merchants," said Dean Polnerow, Switchboard's president. Some merchants "may not quite be ready to do e-commerce today- but they are ready to be represented on the Web."

Discover plans to begin marketing the initiative in March, with an emphasis on restaurants and other businesses that tend to advertise in telephone books.

Discover's Internet efforts on the cardholder end include an alliance with Earthlink Network, an Internet service provider in Pasadena, Calif. Discover cardholders can subscribe for $18.95 a month, a $1 discount.

On its own Web site, Discover hosts what it calls ShopCenter, which offers cardholders discounts at major retailers such as FAO Schwartz and Eddie Bauer.

"The financial institutions are willing to make all kinds of deals to create value-adds both for the merchants and consumers," said Scott Smith, electronic commerce analyst at Current Analysis in Sterling, Va. "There is a scouring of the Internet at this point to create new end-users. Anything goes."

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