Portal Players Jockey For Position

Welcome Guest. | Log In| Register | Membership Benefits

June 23, 1998 (2:41 PM EDT)

Page 1 of 8

By Malcolm Maclachlan,

The Web, once famed for its anarchy, is getting organized. Media companies are preparing the Internet for a mass audience by dividing it into easily navigable streets and neighborhoods. News, sports, finance, and lifestyles sections are just a click a way. Smut and Nazis are nowhere to be seen.

Welcome to the new portal future.

Internet leaders and mass media companies are meeting up in partnerships (see "Analysts Place Their Bets On Portals") that will turn the online landscape into something easy and palatable to the average consumer. Imagine taking a cut from every channel on television, or from every newspaper in the country. This is the scale of the battle being fought.

"Media history shows companies that control distribution of information can extract high value in the dissemination of information," says a March report from Forrester Research, The Great Portal Shakeout. "The 41 percent profit margins of local television stations and the newspaper industry's lucrative classified monopoly testify to this reality."

But despite all the hoopla, portals aren't taking over the Web just yet. While players work to figure out the right mix of content and services, portal traffic remains stagnant, and analysts say they predict ad revenues will fall. And the chaos portals hope to tame is the same chaos websites touted as an alternative to the early, organized ISPs.

Portalnomics
The lucrative nature of the portal race is evident in the wide variety of companies getting involved: Netscape and Microsoft are trying to leverage their browsers, which have portal home pages set as the defaults users go to when they launch the program. Yahoo, Excite, Infoseek, and Lycos are trying to build on their search capabilities by adding other services.

Big media also entered the picture last week in the form of Disney, which announced it would form a portal with Infoseek and buy 43 percent of the company. This followed closely on the heels of NBC's investment in Snap. America Online says it hopes to turn its proprietary Internet audience to a loyal Web-based following. Finally, telecommunications companies AT&T and MCI, as well as newspapers such as The New York Times, are getting involved, as well.

"The portal strategy is now widely accepted as a winning idea," says Adam Schoenfeld, an analyst with Jupiter Communications, in New York.

"Media history shows companies that control distribution of information can extract high value in the dissemination of information."
-- Forrester Research

Yet, looking at the wide variety of players in the portal space, one thing becomes apparent: No one is sure yet of the right mix of content and services that will draw -- and keep -- a mass audience. A successful portal will need services such as stock quotes, free e-mail, auctions, and maps. It will need major brand news and entertainment content. And it will need localized features. The combination will be expensive to deliver, or it'll require big-money partners.

Furthermore, according to the Forrester report, the portal race won't play out quite like traditional media. Instead, it could be undermined by the very Net anarchy it seeks to control.

The Forrester study forecasts portal share of ad revenues will fall even as their viewership rises. It found portals now control 59 percent of Internet ad revenue with only 15 percent of the traffic. By 2002, portals will have 20 percent of the traffic, but only 30 percent of the dollars.

Research by Media Metrix, a company that studies Web traffic, supports the conclusion that portals aren't taking over just yet. Portal sites have reported huge audience gains in the past few months; so has the Internet as a whole. As a proportion of the entire Internet audience, according to Media Metrix, portal traffic has stayed flat (see chart, above).

Next: Why portal traffic is stagnating

Page 1 of 8