A Web portal, also known as a gateway, presents itself as a starting point for Internet users when they first connect to the Web. Portals have evolved from simple search engines to sites offerings a wide range of services. The leading portals in terms of traffic include America Online's AOL.com, Yahoo!, and Microsoft Network (MSN).
All of the leading portals offer an integrated package of services that includes a search engine, news, chat, e-mail, calendars, personalization, content, music downloads, video streaming, and electronic commerce. These services are designed to give portals "stickiness," which means that users will stay there longer and keep coming back to the site. Where portals once acted as a gateway to the larger interconnected world of the Internet, portals are more interested in having users stay within their sites as much as possible. Their strategy is to be a destination, not just a starting point.
PORTALS EVOLVED FROM SEARCH ENGINES, 1996-1998
Three Internet search engines—Yahoo!, Lycos, and Excite—all went public in April 1996 and began the process of transforming themselves into Internet portals. Yahoo!, for example, rolled out many new features and services that were designed to add stickiness. These included a personalization feature called My Yahoo!, and Yahoo! Finance, which included investment research, market summaries, and financial news as well as links to stock quotes, company profiles, and similar information. Yahoo!'s strategy was to become a media company, not just a tool for searching the Internet.
Following its initial public offering (IPO), Excite launched a redesigned Web site and added a menu of defined-content categories on its opening page. The new Excite also included reviews and ratings of some 60,000 Web sites. Before the end of 1996 Excite had added a broad array of information and services to encourage Web users to make it their default home page. The site included City.Net, an information service covering major U.S. and international cities, along with news, reviews, directories, and other resources.
After it went public, Lycos redesigned its graphic interface to look like an Internet portal. While it continued to upgrade its search engine, it added features such a city guide to 400 cities. It also established a Club Lycos that created online communities and provided users with merchant discounts. Lycos, following its transformation into Terra Lycos in 2000, became a dominant international portal with 98 million registered users in 41 countries by mid-2001, making it the third most popular online network in the world.
Not all search engines were able to make the transition to portal. InfoSeek, another search engine, also went public in 1996. It developed into an Internet portal when the Walt Disney Co. acquired part ownership for $472 million in 1998. In 1999 Disney purchased the rest of InfoSeek and launched the Go.com portal. Go.com included content from the full range of Disney properties, including news from ABC, sports from ESPN, and children's and family-oriented content from Disney programs. By 2000, however, it was clear that Go.com would not be able to compete with the leading Internet portals. After Disney sustained more than $1 billion in losses from Go.com and other Internet properties, the company announced plans to close Go.com in 2001.
As Web demographics changed, interest in portals grew more intense. By 1998 Internet users had become more reflective of the general population. Portals were seen as a way to meet the broader range of needs that such an audience would seek to satisfy on the Internet. As part of their strategy to reach this new Internet audience, portals became more interested in adding content, and content providers wanted to leverage their content over the Internet. It was such considerations that led a content provider such as Disney to become interested in executing a portal strategy by acquiring a major search engine like InfoSeek and launching its own portal. Similarly, in 1998 NBC spent $38 million to acquire a 19 percent interest in Internet portal Snap!, which was owned by CNET. NBC subsequently combined Snap! with other properties to launch its own portal, NBCi, in 1999.
In 1998 Netscape's portal, Netcenter, was a hot property whose long-term strategy was to reach the corporate IT (information technology) market. It planned to become a trading platform for business customers and add virtual trading communities in such areas as finance and travel. However, the launch of Netcenter 2.0 in mid-1998 added several consumer-friendly features, including new content channels, a consumer-oriented search feature, e-mail, and browsing services. Before the end of the year, Netscape was acquired by America Online in a $4.2 billion stock-for-stock transaction.
Traffic at Netcenter lagged behind that of other portals. In January 2000 Netcenter had 347,000 unique visitors, compared to 37 million for Yahoo!, 26.2 million for AOL.com, 15.6 million for Go.com, 13.8 million for Lycos, and 9.9 million for AltaVista. America Online was completing its merger with Time Warner when it announced it would recast Netcenter as a business professional's portal. In addition to adding AOL features to Netcenter, such as instant messaging and e-mail services, AOL planned to integrate content from Time Warner into the site.
PORTALS CAPTURE A SHARE OF ELECTRONIC COMMERCE, 1998-2001
In 1998 the major portals were laying the groundwork for adding electronic commerce capabilities to their sites. Yahoo!, for example, acquired software developer ViaWeb Inc. to support business transactions at its site. Many larger corporations, including Office Depot, CitiCorp, and Barnes and Noble, began paying portals for space on their sites. Excite, for example, was charging Office Depot $1 million per year for space on the Excite Web site. Barnes and Noble entered into a five-year, $40 million agreement with America Online to become the featured bookseller on AOL.com. CitiCorp began marketing home-based banking services at Netcenter.
As portals became the default starting point for Internet users, they replaced what were known as online services. Both AOL and The Microsoft Network (MSN), for example, realized they would be more successful if they were positioned as Internet portals rather than simply as online services or Internet service providers (ISPs). Online services that were unable to develop into portals, such as CompuServe and Prodigy, pursued other strategies.
By 1999 the leading portals—Yahoo!, Lycos, Excite, AOL, and others—were among the most prominent of Internet companies. They enjoyed high stock valuations and financial backing from blue-chip companies. More than 20 major brick-and-mortar companies announced plans to develop their own portals. One problem facing the Internet portals was their inability to distinguish themselves from one another. Most portals offered the same features and functions, even to the point of using identical language to structure their content into channels. As a result, as many as 22 million Internet users—more than half the market in 1999—said they had no loyalty to any of the portals, according to research firms Media Metrix and IDC.
Toward the end of 1999 the leading portals added shopping capabilities and other services for the holiday shopping season. AltaVista launched a network of online services that included Shopping.com. Lycos launched LycosShop, which included product reviews and information and links to selected retailers. Lycos also acquired the gaming site Gamesville.com and financial site Quote.com. [email protected], formed when Excite was acquired by high-speed Internet access provider At Home, acquired online greeting card company Blue Mountain Arts. Yahoo!, meanwhile, bought GeoCities to enhance its community-building and Internet publishing efforts. It also acquired Broadcast.com to offer more streaming media to users and more rich media options to advertisers.
Many consumer portals began courting the business-to-business (B2B) market during 2000. Yahoo! had already introduced Corporate My Yahoo! in 1999, which featured personalization tools and allowed the integration of corporate content. In 2000 Yahoo! launched its B2B Marketplace, a central site where buyers and sellers could compare prices from different B2B communities across the Web. B2B Marketplace was designed as a portal leading to other vertical trading communities, also known as vortals, rather than as a large trading community of its own.
America Online's B2B initiatives in 2000 included positioning Netcenter as a portal for business professionals. In Fall 2000 AOL unveiled its new Netscape Netbusiness service, which was designed to help small businesses build Web-based storefronts and engage in business-to-business e-commerce. AOL and PurchasePro, a marketplace developer, formed an alliance to develop Netscape Netbusiness. Netscape Netbusiness was organized in three sections: My Industry, My Business, and My Life. It included e-mail, a business version of Netscape Instant Messenger, industry-specific news, market research, expert opinions, maps and directions to member businesses, and community tools for sharing information. Hewlett-Packard agreed to link its HP Business Store to Netbusiness, while Monster.com agreed to develop a recruitment industry marketplace for Netbusiness.
According to a study by Booz-Allen & Hamilton, portals were more successful in attracting eyeballs than were entertainment or financial sites in 2000. Nearly 98 percent of all U.S. Internet users visited a portal during 2000, compared to 80 percent visiting an entertainment site and 43 percent visiting a financial Web site. The study found that users spent 49 percent of their time using portals as a search engine or gateway. The rest of their time at portals was spent using other portal options, including telecommunications and Internet services (17 percent), news and information (10 percent), online communities (6 percent), directories and classified ads (4 percent), entertainment (4 percent), financial services (3 percent), and shopping (2 percent).
During 2000 Web portals appeared to be turning those eyeballs into electronic commerce and enticing their visitors to portal-affiliated shopping sites. According to June 2000 ratings compiled by Nielsen/NetRatings, Yahoo! Shopping was the Web's top portal shopping site with 5.8 million unique home-based users, or 7 percent of all Internet users. AOL's Shopping Channel had more than 3.4 million unique visitors, while AltaVista's shopping area drew 2.6 million unique users. MSN's shopping center ranked fourth with 1.2 million unique shoppers.
When it came to online shopping, portals offered visitors specialized search engines and the ability to comparison shop. Portals also attracted more small retailers through their storefront business models first made popular by Yahoo! Shopping. Portals also offered auction sites that attracted many small businesses. These developments reduced the cost of selling online for smaller businesses and made it more attractive for them to sell online.
The portals' e-commerce strategies seemed to pay off during the 2000 holiday shopping season, when the leading portals experienced higher growth rates in holiday sales than stand-alone online retailers. American Online reported an 84 percent increase in holiday sales from $2.5 billion in 1999, while Yahoo! and Lycos both said that the e-commerce activity generated by their shopping services doubled from the previous year. By comparison, e-tailers had an average growth rate of 40 percent for the holiday season, according to the Yankee Group. Yankee also reported that 57 percent of online consumers began their online shopping trips at a portal or a portal-based mall. While portals enjoyed higher growth rates than stand-alone retailers, specialty brand name e-tailers were still considered to be the leaders in online shopping.
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