Forget content, the portal world is becoming an e-commerce
It wasn't long ago that portals were able to trump subscription-based
services--with the notable exception of America
Online--by offering free Web content. But lately, the paradigm has
begun to shift.
This comes as no
surprise, given that e-commerce has matured into a major
source of revenue on the Internet. And as market research firms
forecast billions in potential online revenue, online
strategies also are changing to accommodate the boom.
E-commerce market potential is clearly positioned to outstrip that of
advertising, say market researchers. Jupiter Communications expects holiday season
e-commerce revenues to reach $2.3
billion, up from last year's $1.1 billion. Forrester
Research predicts that e-commerce revenues this quarter will reach $3.5
tripling figures from the same period a year ago.
While Web portals continue to attract hordes of Netizens searching for free
information and services, portals and publishers in general have
increasingly seen that
advertising-supported content is not enough to survive on the Web.
"Most content providers expected that their business would be driven by
advertising revenues, and what they've seen is that the size of the
advertising market is fairly small, still," said Kate Delhagen, a Forrester Research analyst.
"Advertising's total market value is about a tenth that of e-commerce's
market value," she added. "Portals simply can't generate enough dollars
Mark Mooradian, an analyst with Jupiter
Communications, agreed. "In the same way content captured everyone's
imagination two or three years ago, commerce has displaced that."
Portals: virtual shopping
Web portals heavyweights such as Yahoo,
Excite, MSN.com, Netscape Netcenter, and Lycos, have shifted their focus
aggregating content to providing starting points for
Portals have built designated shopping channels that
aggregate links from retail partners, such as , CDnow, and other product-specific
companies. The partnerships provide a lucrative revenue stream, since
merchants pay portals millions of dollars over many years to gain
sponsorship on a shopping page. Often, they also strike revenue-sharing
AOL has achieved fame in the industry for its ability to attract
multimillion-dollar partnerships in the same model. AOL has inked a number
of high-profile deals that give merchants exclusive rights to sell their goods
in a given category.
And with the holiday season around the corner, portals are expected to step
up to the role of online shopping mall. For retailers, this holiday season
will serve as a litmus test to see how well their portal investments pay
Already, portals are preparing for the shopping onslaught and the increased
expectations from their partners. For example, Excite and AOL last week introduced
online "wallets" in an effort to expedite e-commerce transactions. Instead
of entering billing information each time a user visits separate merchant
sites, users register once and can shop over a number of sites. Yahoo is
also expected to announce it own online wallet by the beginning of the
holiday shopping season.
"We've reached a point where there's plenty of interesting offers for
viable goods and services online, and security issues are better," said
Julia Pickar, an analyst at Zona
Research. "Now is the time to push for e-commerce and have people
convert their behavior.
"They've established the comfort zone, now they want to see how they can
Buying the buyer
Portals have also made hefty investments to please their commerce
Lycos has made a number
of bids to increase its e-commerce vendor reach by
creating a Web-property network. It has made a number of high-profile
acquisitions this year, gobbling up small Web communities and
directory-based services, such as Tripod, WhoWhere, and Wired Digital. Lycos said it can now
sell advertising packages that can reach more users, while pursue deals
with their e-commerce partnership competitors--such as partnering with
Amazon in some of its sites, and Barnes and Noble in others.
But Lycos's acquisition of Wired
Digital, demonstrated how content remained secondary to the
commerce-oriented cash cow.
The object of Lycos's eye was HotBot, Wired's search directory that has
cultivated a dedicated user base of seasoned Web users. Lycos said
HotBot's appeal is a user base that is not
skittish about purchasing online. Though the Wired Digital deal also includes
popular editorial content with Wired
News, HotWired, and WebMonkey, Lycos wanted to increase its
appeal to advertisers, and especially to potential merchant partners.
"Essentially, instead of them becoming a portal, they want to become more
of a hub," said Vanderbilt. "So there will be a more meaningful customer
database that they own, and they want to cull additional value from that by
passing on customers with their partners."
Toeing the line
The Web's movement toward commerce also raises a number of ethical issues,
especially for editorial content producers, such as magazines or
topic-specific publications. Already, the editorially-oriented Web sites,
including CNET News.com, feature links leading to retailers, such as
booksellers. News sites, such as CNN, ABCNews, and MSNBC also toe the editorial line by
offering commerce channels alongside editorial content. And the list goes
on with magazines, such as Newsweek
or Salon, and entertainment
as Disney, either support or feature
Though content has become a tool to attract users to advertising and
commerce, editorial on the Web raises a number of issues that have yet to
be resolved, said Delhagen.
"Some consumers, probably a minority, are very sensitive of objectivity of
the press," she said. "Now there's a lot more [focus] on convenience and
getting needs addressed in one-stop shopping.
"The PC-based screen is the first time where we can consume content and buy
products at once I think that that is the epiphany that many companies are
facing now, and that there will be some editorial angst over erosion of the
editorial channel," she added.