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
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
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
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
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
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
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
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
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."