Last year, people were going to make a bunch of money on the Internet using “push” technology to automatically give users just the information they wanted as soon as it was available. But it turned out that users didn’t actually want to participate, and today just the word “push” in a business plan is enough to send investors swarming out the windows.
This year’s Internet economic model is “portals,” designed to be a jumping off point for Internet users. Boosters say they’re going to build a Web site that acts as a home base for people or a Web site so deep and rich that visitors spend most of their on-line time cavorting among its offerings.
The more users–known as “eyeballs” in the trade–who visit, the more money a portal site can make from advertising, taking a piece of the pie from other companies that use the portal to sell their goods, and similar arrangements.
While that idea isn’t producing any serious profits now, it’s nonetheless looked on as the surest way to make money in the future on the Internet. But how much of this is hype run amok, and how much is a viable business model in its fledgling stages?
Whichever description is accurate, executives are betting the ranch on the concept, bidding up prices on offerings like electronic mail, search engines and similar features designed to attract and keep those eyeballs, and the stock market has given would-be portal sites tremendous valuations. But a few analysts are questioning whether this is just the latest fad, and whether anyone will actually make any money.
“It’s all very breathless. But nobody has come forward with the engine that transforms eyeballs into profits,” said James C. Balderston Jr., an industry analyst with Zona Research Inc. in Redwood City, Calif. “The potential is substantial. But there’s a bit of a debate right now, wondering whether a pair of eyeballs will really equal a dollar. It’s only the promise of a dollar, and it’s unclear how much of those expectations are due to Internet fairy dust.”
True believers say all you need to be a successful portal are lots of services, such as on-line games, that attract users and keep them there, combined with a huge marketing budget. But some experts say the fundamental underpinnings of portal economic theory, which revolve around such marketing concepts as branding, may not be valid. Even so, companies like Netscape Communications Corp., Infoseek Corp. and the king of the portals, Yahoo Inc., are pouring money into their operations, waging a war of attrition.
“The industry’s in a growth phase,” says Jennifer Bailey, senior vice president for marketing and strategic development for Netscape’s portal project, Netcenter. “There’s a lot of new users coming onto the Net. What you see portals doing is investing today to acquire those users on some branded basis and to achieve some sort of loyalty, so that over the long term, those users become more profitable.”
The first primitive portal developed somewhat accidentally with the widespread release of the Web browser developed by Netscape. Launching the browser brought users to Netscape’s Web site, a setup designed in part to encourage users to upgrade to subsequent browser software. While users can change their browser’s home page–the page it opens when the browsing software is launched–many either don’t bother or can’t figure out the process.
Netscape’s default home page structure eventually became a cash cow for the company, pulling in $108 million in fiscal 1997–about 18 percent of its business–from fees related to that site, such as companies paying for links displayed prominently there.
Other companies developed their portal theories because they started out as a locator, places that Internet users rely on to find things. There are two types, directories and search engines.
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Search engines generally rely on software robots called “spiders” that crawl through every Web page they can find. The spiders essentially take a snapshot of the Web at a fixed point in time; that data is used by the search engines to let users search for Web pages by specific words.
The Web is a fabulous tool, but it suffers from a fatal organizational flaw: Information is scattered whimsically throughout the Web. Search engines quickly became critical to Web users for the simple reason that they were the only way to find anything.
Classic search engines include Hotbot, Excite and Infoseek. Yahoo looks and works like a standard search engine, but it doesn’t rely on spiders to develop its database. Yahoo employees pare lists of useful sites and link them to keywords. These and other techniques let a user looking for rental cars get a list of several rental car agencies, not a complete list of all car rental agents with Web sites, but enough to probably find a place to rent a car.
Yahoo and the search engines have been adding lots of services to their Web sites in an effort to attract and keep users, a key to the portal concept. Free electronic mail, chat, stock quotes, even board games are now standard equipment on portal sites. It’s an arms race, with all the competitors matching each other feature for feature.
Netscape’s redesigned portal site, for instance, now starts out with a search engine at the top of the page, and a bunch of categories immediately underneath. The design is strikingly similar to that of portal competitor Yahoo, a fact Netscape executives freely acknowledge.
And some experts say the ability to rapidly incorporate the key features of your competition into your product makes this whole portal thing kind of iffy.
Portal proponents hope to build a kind of electronic community, based largely on a marketing concept known as branding. Branding in the real world is part of what makes you think of Coke when you want a bottle of pop; brands are designed to be recognizable to shoppers on their next trip to the market via things like color or design.