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News > Technology
Pressure on portals grows
April 16, 1999: 12:58 p.m. ET

Internet destination sites must move beyond one-size-fits-all approach
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NEW YORK (CNNfn) - Just a few months ago, portal was the buzzword running throughout the Internet world. Now, it's uncertain if being a mere portal is all it's cracked up to be.
     Sites like Yahoo! (YHOO) and Lycos (LCOS) were no longer just search engines. Suddenly, they were portals.
     These portals, or destination sites, aggregate content from scores of disparate third-party sites. The idea was that users would begin their Web surfing at a portal, which they would use as a springboard for moving elsewhere.
     Investors and analysts alike were high on this business model, believing portals would drive electronic commerce revenue for their partners, which in turn would attract enough advertising revenue for the portals.
     That model hasn't failed, but it hasn't worked out quite the way many had originally predicted.
    
Not what it seemed

     Companies such as Lycos continue to lose money, and the profitable ones, like Excite Inc. (XCIT), don't exactly set the world on fire with their earnings.
     More bad news: A report published earlier this month by Jupiter Communications, a New York-based new-media research firm, estimated that online commerce driven by the top portals would grow to 20 percent in 2002, up just slightly from the 18 percent estimate in 1999.
     While 20 percent isn't an insignificant figure, analysts said it does indicate that the importance of Web portals may have been overstated.
     "Portals still play an important role," said Marc Johnson, digital commerce analyst at Jupiter Communications. "But there is truth to the idea that their importance may have been overblown."
     Mike Wallace, an analyst at Warburg Dillon Read, said e-commerce companies will continue to need portals to help drive their businesses, but their dependence will lessen over time.
     "Portals do drive e-commerce," Wallace said. "But I think some e-commerce companies overpaid and expected too much. As e-commerce companies build their own stream of traffic, they'll need to depend on portals less and less."
    
The need for a niche

     Portals also have had a rough time trying to be all things to all people. And for newer players, it will be nearly impossible to survive without carving out some sort of niche for themselves.
     The one-size-fits-all approach "works for the already established portals," Wallace said. "For the newer ones, they have to stick to a singular focus. The game is basically over if you're trying to compete with Yahoo! or AOL (AOL) or Microsoft (MSFT)."
     But Johnson said even the bigger portals have been forced to face that reality. Consolidation in the Internet sector promises to change the face of the portal industry.
     Earlier this year, high-speed Internet access provider @Home Corp. (ATHM) agreed to acquire Excite Inc. (XCIT) for a deal then worth $6.7 billion. Also, cable television and Internet firm USA Networks Inc. (USAI) set an acquisition of Lycos.
     Through those deals, both Excite and Lycos will move beyond their standard portal fare. Excite will attempt to be the site of choice for cable-based Internet offerings, while Lycos will link up with USA Networks' Ticketmaster-Citysearch Online and Home Shopping Network to become more of an e-commerce player.
     Even Yahoo!, the clear leader in the sector, realized it needed to expand its offerings to stay ahead. Earlier this month, the company acquired Internet video and audio broadcaster Broadcast.com Inc. (BCST), which will give the portal the edge in offering multimedia content.
     "The Excite and Lycos deals indicate a resolution that these companies have to do some different things," Johnson said. "The big challenge is that the primary portal brand that has been established is what consumers recognize. But over time, they have to realize that people gravitate to more specialized content." Back to top
     -- by staff writer John Frederick Moore

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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.