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Portal Wars 2000: What's Ahead

Who will survive the coming battle for portal supremacy? Don’t assume it will necessarily be the one that offers the best customer service, or the best portal personalization.  We can hope for this, but we also have to understand the players behind the portals, and what a victory in this realm can mean to them.  They'll try to win this game by asserting, or reasserting, profound forms of market control.

Yahoo and AOL - Precarious at the Top?

The status quo in the battle of the portal giants is this:  Yahoo! and AOL have established powerful online brand presences in very different ways.  AOL's history of marketing its online access service with a blizzard of free CD's and the ease-of-use theme (who would have thought that a male voice announcing that "you've got mail" could be such a powerful marketing tool?) is well known.  Yahoo, on the other hand, rose to prominence as a web directory; it didn't have AOL's advantage of getting people there through its own net access service.  That makes Yahoo doubly impressive.  It's still going strong as users stick with its comprehensive offerings.  In spite of Yahoo's drawbacks, few disagree that it offers superior integration of its various tools.

These two new media giants are firmly rooted at the top of the portal traffic rankings, and they did it 'their' way.

But the fun and games are just about over.  Those 'other' media giants are getting into the action.  That's good if you're already owned by them; very good if you're being courted by them; not so good if you are hoping to stay independent and duke it out with Disney.

Cigar-chomping entertainment moguls, meet your new employees: baggy-eyed web slaves

The battle for wired media market share is about to get bloodier as larger players enter the fray.  Sensing they're falling behind their rivals, companies like Disney and NBC have been gripped with a sense of urgency about the Internet, now that it is clear that being shut out of the consumer portal race could mean being shut out of everything:  communications, media, banking, commerce, gaming, the works.  Of course, these two did something about it:  they acquired major Internet properties and are pouring money into developing them.  Go Network (Infoseek) and Snap/Xoom continue to surge in the traffic rankings.

As Internet stock analyst Steve Harmon recently commented, the portals provide a 'platform' and not just an audience.  Large media companies will have to continue catering to their audiences' desire to be entertained for free, but the Internet - as a 'platform' - offers them the chance to generate new revenues from a variety of services from banking to gaming to shopping.

That old Micro-soft-shoe

While we're on the subject of computers and platforms, let's not forget about Mr. Platform himself, Bill Gates.  Microsoft appears to be the leading contender in the portal race, and is arguably the nastiest competitor of the bunch.

Gates knows a little bit about portals and platforms. I’m not talking about Microsoft’s massive investment in its MSN portal - which may or may not be number 3 at the moment - or its moves to acquire major cable access providers. Microsoft has been a ‘portal company’ ever since Gates purchased something called "QDOS" (Quick and Dirty Operating System) and convinced IBM that Microsoft was a premier DOS developer, one that should be trusted to power personal computers on an ongoing basis. 

It should also not be lost on anyone that Microsoft followed up on its wildly successful market tactics with DOS by launching an even more pervasive platform called Windows.  This most famous deployment of its ‘embrace and extend’ strategy essentially involved the mass-marketing of a product which was remarkably similar to the Macintosh operating system. Windows has long been the dominant ‘portal’ to the stuff we do on our personal computers. Though the company may deny it, most users have a sneaking suspicion that they are going to have mysterious computer glitches unless they use office software (MS Office) and a browser (Internet Explorer) also produced by Microsoft. Microsoft actually had the audacity to claim, in the drawn-out antitrust proceedings against it, that Internet Explorer was a ‘feature’ of Windows. When Microsoft made Internet Explorer a Windows ‘feature’, it was officially playing hardball. Microsoft has long used the ‘Windows portal’ to wield market power. It’s an old hand at this game.  You can be sure that it's going to try to assert its control in the Internet space using everything it has at its disposal.

We're talking about a profound kind of market power here. It stems from everyone's need for a reliable and predictable environment within which to perform daily tasks: an operating system. The combined power of two phenomena – the Internet, and the need for a ‘daily task environment’ – could put Microsoft at the center of everything again in the next century.  At present, there is no dominant player in the jumble of access providers and portals.  We know that if Microsoft gets serious about the Internet, a few of its competitors will be obliterated.  But it won't dominate the whole field.

Watch our stuff, buy our stuff...resistance is futile (and not nearly as fun as watching sports on cable)

What makes this all so interesting is that entertainment and television companies also understand the idea of market power, controlling audience tastes, and limiting choice.  Analysts gave the thumbs-up to Viacom's recent acquisition of CBS.  Why?  They agreed with these companies' premise that "you've got to be big" to survive in the global media and entertainment business.

The intensified portal wars which await us in the year 2000 constitute perhaps the most significant economic battle in the technology field, and perhaps of any kind, as pricing models, business models, and the blurring of lines between media, computing, and telecommunications have the potential to create new economic behemoths and leave others mere shadows of themselves. Where was Yahoo! ten years ago? Where will it be in ten years? We know the answer to the former question; the latter depends on whether, and in what fashion, this portal pioneer hooks up with a major broadband access provider or major media giant. Odds are Yahoo will thrive: it’s created a powerful brand without unduly abusing its position.

Harmon recently suggested that Viacom-CBS could catch up to its rivals in the Internet race by acquiring #4 portal Lycos.  But why not go after the best:  Yahoo?

An $8 billion pipsqueak called CMGI, Inc.

The stakes of the portal and web media shakeout that is going to take place over the next couple of years can really only be comprehended by examining the size of the companies which are behind the top 10 portal players. We must take account of Alta Vista, currently the #10 or #11 web property. Always a technologically superior search engine which languished under its creator, Digital, it became increasingly popular under the stewardship of its new owner, Compaq. Then, along came CMGI, Inc. – the remarkable Internet-focused holding company – to buy up Alta Vista for an astounding price in order to make it into CMGI's flagship portal offering. The move was prompted by CMGI’s concern that government regulators would force it to declare itself a mutual fund unless it started running a major business of its own.  Is Alta Vista going to fizzle?  It's hard to imagine.  But then again, it may be another acquisition target for the aforementioned Viacom media empire.

Will GO Network and Snap successfully push their way into the online broadcast scene? Do executives at these companies "get" the web? Or will they be defeated by smaller upstarts like Go2Net (a rising star at #9 on the Media Metrix list) and their not-so-small friend, Paul Allen’s Charter Communications? Will Microsoft’s Internet ambitions be beaten back again, as it was when it first tried to offer Internet service through MSN? Will market control tactics work amidst public sentiment which seems at its wits’ end with the Microsoft empire? How far will government regulators let such tactics go?

The stakes are just that big: GE, Disney, Microsoft, and the like are facing off against telco giants, cable access providers, nimble web-focused companies like Yahoo, and even newer-generation tigers like Go2Net. And then there’s AOL.

After things shake out, the concept of competing portals may lose much of its meaning. Major internet brands will likely become strategic subsidiaries of competing global media conglomerates. As such, their identities will become somewhat submerged, and their roles won't always be easy to define.

minus + minus + plus + PLUS = shareholder value, Mr. Fever

I'm reminded of a scene from the insightful 70's sitcom WKRP in Cincinnati. Mrs. Carlson, the martini-swilling owner of the station, explains to bewildered DJ Johnny Fever that WKRP is supposed to lose money. "In a diversified corporation," she explained, "it's not about the plus and the minus. It's about the minus and minus and plus and PLUS." Fever replied as any good Internet analyst would today. "That's so deeply warped that even I get it."

 

 

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