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Portals as Net's TV stations

The top five portal sites will be as important by the year 2000 as television networks are today, a new study says.

Is "portal fever" just a case of the sniffles? Nothing of the sort, according to a study released today.

The top five portal sites will be as embedded into the public consciousness by the year 2000 as television broadcast networks are today, says new research conducted by the Gartner Group.

Given the potential of these portal companies to become the new media elite, Portalopoly businesses wishing to reap the benefits of the Internet should now jump onto the backs of these content and service aggregators or risk missing a window of opportunity, the study concluded.

"What the Web needs--and what it will have within two years--is a handful of sites that serve the same purpose as today's major TV networks," said Patrick Meehan, research director at Gartner Group, in a statement. "Users of the Web will migrate toward these sites, known today as portals."

To benefit from portals, the report suggested three strategies to be competitive in this space, which they aptly dubbed "win, place, and show." The "win" strategy calls for a company to invest tens of millions of dollars and build its own self-sufficient portal. "Place" suggests that a firm forms a partnership with a portal by providing it with content that will be featured on the site. The study said that most players will end up pursuing a "show" strategy, which calls for the company to be included as a featured search on the site's directory.

The study warned that most companies need to act quickly to get into the portal space. Since creating one's own portal has become increasingly difficult, the study recommended that any exposure on a portal is better than no exposure.

"Firms that make no portal strategy decisions by mid-1999 risk missing the opportunity altogether," added Meehan.

Internet gateway services--now widely known as portals--focus on featuring content and services provided by either the company itself or through partnerships with third-party providers. As a result, leading portal sites such as Yahoo, Excite, and Lycos offer users a flurry of features such as search directories, personalization, Web-based email, and content channels for free, which they hope will drive up traffic and boost advertising revenues.

Major technology companies also are entering the game. For instance, software giant Microsoft is in the process of entering the ring with its own beefed-up offerings that integrate all of its Web services and properties into a MSN-branded network.

Rival software firm Netscape Communications shifted its business strategy from Web browsing software to emphasize its own portal offering, Netcenter.

Traditional media companies also have made their bids to become players in the space through hefty investments, as seen with Disney's 43 percent stake in Infoseek and NBC's 19 percent stake in Snap, which can be extended to a 60 percent stake. (Snap is a division of CNET: The Computer Network, publisher of NEWS.COM.)

Although hype about portals as being a successful business strategy for the Internet has sent Internet stock valuations into the stratosphere, many industry observers have nonetheless raised warning flags. Despite the upswing for Internet companies, many have labeled them as overvalued and have drawn similarities with biotechnology companies, which promised blockbuster deals and gigantic returns but often were not regarded as good long-term investments.

As for the elite five that will come on top by 2000, Meehan made his own predictions during an interview, adding that the companies who will top the ratings will be "media companies that understand what it takes to become a new media company."

Based on "real audience" estimates (which gauge the number of visitors going to a site by choice rather than by default), Meehan predicted that current leader Yahoo would top the charts due to its advantage in the marketplace and its established brand.

According to Meehan, the No. 2 and 3 spots are a tie between traditional and new media ventures Disney-Infoseek and NBC-Snap, which would leverage strong technology offerings with mass prime-time promotion.

The research director believes Netscape could finish in fourth place if it embraced the concept of becoming an Intranet portal. In fifth place, Meehan thought Liberty Media, headed by TCI chief executive John Malone, would release its own compelling and competitive portal offering.

Meehan stressed that the new media elite would be the companies that recognize and "understand the PC-centric environment" and evolve toward converging television and the PC. In his opinion, many of the previously mentioned firms do understand the shift.

"It's not a big leap to see that certain portal players will jump into the interactive space," he added. "Consumers have capacity for four to five of these services, but real differentiators are those who go toward interactive television."

The release of today's report by Gartner, which has traditionally focused its research efforts on the enterprise sector rather than the consumer space, may be a positive indication that portals may be around longer than many had expected.

The portal phenomenon "represents new horizons and new creative opportunities and challenges for the IT professional," Meehan said.