June, 1999

One of the hottest buzzwords of 1998, “portal” is a term given to websites that act as gateways to the web. They are places that Internet users go to find directions to other websites or the answers to their online needs, primarily because they provide structure and convenience through comprehensive content. Understanding why people visit these portals and their commercial strategies will be a key to successful internet business longevity.

Portals have originated from four distinct types of websites: search-engines like Alta-Vista and eXcite; directories like Yahoo, Looksmart and CitySearch; Internet Service Provider home pages like AOL, OzEmail and Telstra BigPond; or major publisher’s websites like NineMSN. The word portal may in fact be something of a misnomer because it implies it is the entry or starting point. Portals are in fact become destination sites, proving full-service one-stop shopping for web users.

The buzz around portals has been created because they command an increasing share of Internet traffic making them an attractive proposition to everyone from Wall Street to online advertisers and e-commerce merchants. They act as a distribution funnel for these large audiences to the websites of online merchants and content providers who depend on the traffic they deliver for meeting return on investment. And in the fierce online competition for “eyeballs” amongst users, portal is indeed an aspirational title for any would-be web entrepreneur. But the key is not simply to attract new eyeballs; its about keeping them returning regularly by providing a comprehensive base of services and other loyalty techniques, like free email addresses.

And it appears to be working. Web surfers are spending less time using search activities and more time exploring the other services offered by portals. For example, search accounts for less than 50% of eXcite.com’s traffic.

Competition amongst portals is vehement. Not surprisingly, having a strong brand with good awareness and appealing values is probably the single greatest key to success. In the September 1998 Portals Survey released by APT Strategies, we can clearly see who is winning and losing in the battle for market share.

Although major portal brands such as Yahoo, Yellow Pages Alta Vista, InfoSeek and Lycos are most often used, the depth of content and functionality see home grown brands like ANZWERS and Web Wombat achieve respectable percentages at 20% and 14% respectively.

If you’ve caught any of the feverish activity by the major portal players in Australia in the news lately, it is clear that this game has just begun. The behemoth AOL entered the Australian marketplace in October. The world’s largest online content and Internet access company has aggressively been doing content deals with Australian companies ranging from Pacific Publications to www.travel.com.au. This will allow them to offer comprehensive content and compete with its Australian portal competitors who are also offering everything from search to email addresses, weather, shopping, travel, financial services and of course, chat. But unlike its major Internet Service Provider rivals such as OzEmail and Telstra BigPond, AOL appears not to have yet established a brand identity in the Australian marketplace through brand advertising, choosing to implement a direct-marketing campaign to acquire subscribers and using the press to generate excitement.

Most of the portals are continuing to grow their online service offerings through alliances and acquisitions, a trend which is very likely to continue. The race to build the best services in order to attract the most visitors becomes more and more expensive as the competition heats up. It would not be surprising if we begin to see consolidation of the portal market with major media companies acquiring different types of portals. Evidence of this includes newspaper publisher Fairfax’s recent investment to take controlling interest in the Big Colour Pages, tightening its links with the CitySearch portal. The deals and alliances that will fall into place or fall-out over the next 18 months may determine the future success or failure online of the major players.

A solid understanding of how and why Australians use the Internet will likely lead to many of these alliances. For several clients, APT Strategies conducted the September 1998 Portals Survey which showed that 10% of respondents stated they use the web for Internet Telephony. This is equivalent to the number that said they used it for booking travel, a category that usually gains a lot more attention. Insights like this may prove to have been the motivators for the portals like OzEmail who are investing heavily in Internet Telephony.

Yahoo has begun to align with companies and invest in other forms of communication. This includes paging, Internet telephony and having digital video delivered to your email inbox as well as a system that allows you to pick up your email over the phone. Yahoo doesn’t have the massive telecommunications infrastructure of Telstra or the rich content of NineMSN- but it does have eyeballs.

Reverse direct marketing is set to become more prevalent as market forces pressure portals to look for incremental revenue beyond banner advertising. Yahoo are constantly reshaping their content and resetting the pace of the game, evidenced by their recent investment in Yoyodyne, the leader in online games and sweepstakes.

Some industry pundits say that there will be a big shake-out in the portal market in the not too distant future, that the cost of competing at the top will sort the wheat from the chaff and that longer term there will only be a handful of major portals, similar to the TV industry. Others say this is typical of analogue thinkers trying to squeeze traditional media paradigms into the round hole of the Internet. These people say that users will build up to a repertoire of hundreds of sites, using up to a dozen regularly at a time, dependent on their needs.

Time will tell and keeping an eye on how the evolution of the portals will make up much of this story.

For more information contact APT Strategies at info@aptstrategies.com.au