Thursday, November
2, 2000
Portal Victories Will Be Short Lived
Across Europe, Web traffic will evolve in a progression that favors a few
top portals and chokes off the rest, according to a recent Report from
Forrester Research B.V. But even the winning portals will lose their
relevance to marketers as specialist sites, marketing services providers,
and new platforms compete for the same budget, the Report asserts.
"In Europe, a mix of US invaders like AOL and Yahoo!,
plus national telco-linked portals like Terra will win
the portal shakeout," said Forrester analyst Hellen K.
Omwando. "The next 10 portals by traffic, like World
Online and AltaVista, will fight for top spots but will
suffer from undifferentiated offerings and lack first-mover
advantages."
European markets like France and Germany are moving
toward the current situation in the UK, where the top
three portals grab 14% of traffic -- nearly three times
the next 10 portals combined -- and 39% of online advertising
revenue.
European winners like AOL will benefit strongly from
an ISP play that draws automatic traffic, and Yahoo!'s
household name and partnership network ensure its success.
Only three of the dominant national portals backed by
deep-pocketed telcos will triumph on a Pan-European level.
Terra already dominates in Southern Europe and will use
its recent acquisition of Lycos to reach consumers in
Northern Europe. Wanadoo will thrive because of the momentum
it will gain from cross-promoting access and content
from Pan-European sister portals like Voila. Lastly,
T-Online -- Europe's largest ISP -- has the money to
penetrate new markets through acquisition.
"As Dot Com venture capital funding dries up, marketers
will tighten their belts and slash spending at second-tier
portals," Omwando added. "Plus, brick-and-mortar companies
that move their advertising online will prefer top-tier
portals because they guarantee the most visitors. This
will result in second-tier players either courting top
tiers for acquisition or refocusing their business models
on access, consolidating with peers, or simply folding."
By 2002, the portals that survive the shakeout will
enjoy momentary victories -- but their unchallenged dominance
of online marketing spend will soon erode. Although portals
will remain a key piece of the marketing mix, marketers
will increasingly divert budgets to three alternative
avenues -- specialist sites, marketing services providers,
and new distribution platforms. As European firms diversify
their online marketing strategies, they will divert budgets
from portals to specialist sites that offer targeted
audiences, repeat exposure, and commerce tie-ins. As
marketers strive to attract and retain specific target
groups of consumers across multiple sites on a Pan-European
level, they will increasingly entrust budgets to ad networks,
email service bureaus, and affiliate networks.
"Forrester forecasts that by 2005 more consumers will
spend time on their mobile phones and iDTVs than using
the PC Internet where today's portals thrive," Omwando
continued. "Platform operators are already positioning
themselves as iDTV portals and have built walled-garden
services where they control all access to content through
their set-top boxes. They will use their first-mover
position to lock up the best content providers wherever
they operate -- keeping competitors at a permanent disadvantage
even when walled gardens open up. But the mobile Internet
will not drive revenue for two reasons -- first, few
ads will be served and second, mobile retail revenues
will amount to only 5 billion in 2005, yielding meager
sales commissions."
For the Report "Europe's Portal Squeeze," Forrester
spoke with 40 marketing executives at European firms
that have at least one portal deal: 19 retailers, five
financial institutions, eight brand advertisers, and
eight content, community, and/or auction sites.
