A new online service, offering Irish Internet users a news, community and shopping service, plans to rival international sites such as Yahoo and America OnLine. But Online.ie, scheduled to begin operating officially yesterday evening, was hampered by last minute technical problems.

Developed over the last two years by Ireland On-Line (IOL) founders, Mr Colm Grealy and Mr Barry Flanagan, Online.ie has received £5 million (#6.35 million) in initial investment backing.

Venture capital companies Crucible Corporation and Philadelphia-based Cross Atlantic Technology Fund have taken a 37.5 per cent stake in Online.ie.

Forty staff share 10 per cent of the company, which will be increased to 15 per cent as Online.ie grows to 100 employees within one year. The remainder is equally divided between Mr Grealy, Mr Flanagan and Mr Frank Hannigan, sales and marketing director.

Online.ie will operate on a collaborative basis with a range of content contributors and retail merchants. It expects to attract 200,000 users, accounting for around 20 per cent of the Republic's online population within one year. Up to 200,000 products will be available at discounted rates and Online.ie plans to link up with retailers initially. Following a "flat fee" payment of £500 to £3,000 a month it will offer retail products for sale.

Technology, news and sport information will account for a significant portion of Online.ie's initial service. It has signed agreements with leading domestic and international media partners, including Reuters, Associated Press, the Guardian, The Irish Times, the Examiner and the New York Times.

Online.ie will soon offer an instant messaging service similar to and compatible with those already offered by Yahoo, America OnLine and Microsoft.

The company has set a sales target of £1.4 million for the first 12 months.