January 2000: The dot-com frenzy reached its peak with sky-high valuations of
dot-coms and people becoming millionaires almost over night. It seems that no
one wants to be left out of this fashion craze.

January 2001: The landscape has changed. Gone is the unbounded craze post the
dot-com shakeout in mid-2000. Talk of IPOs is now replaced by terms like path to
profitability as many dot-coms struggle for their next round of VC funding.

Post dot-com shakeout, the dust began to settle and there began a shift for
viable and successful business models. Whereas the early business models were
mainly based on revenues largely driven through banner ads, the focus is now
shifting on brand building and the redesign of business models.

A paradigm shift?

Booz Allen and Hamilton (BAH), in a recent survey, found that consumers have
fundamentally changed the way they use portals treating them as destinations,
rather than as gateways to other sites. BAH found that 60% of Internet user
sessions include a visit to a portal; by contrast, 22% of user sessions include
visits to entertainment sites. News and information sites are visited in 20% of
user sessions, while shopping sites show up in 17% and sports sites in only 5%.
Users spend far more time at portals than anywhere else. Virtually all users–98%–have
visited a portal at some point, compared with the 80% who have visited
entertainment or information sites, and the 43% who have tried financial sites.

Horacio Rosanski, VP, Booz Allen and Hamilton, says, “Portals are no
longer mere gateways to the Internet, but destinations in and of themselves.
Although 60% of Internet user sessions include a visit to a portal, only 6% of
websites are accessed through a portal’s search engine. Marketers must start
thinking of portals in the same way they think of mass-circulation magazines and
television networks–as major centers of commerce and content that draw huge
audiences.”

Portals have changed their use and purpose, and are looking at different
business models. The old concept of revenues from ads supporting portals is long
gone. Yahoo stocks fell after it announced a slowdown in Internet advertising
would cause it to miss analysts revenue forecasts by up to $300 million. The
Walt Disney company announced in late January that it was shutting its portal
Go.com. Michael D Eisner, CEO, Disney Portal, said, “The advertising
community has lost faith in the Internet and specifically in portals.”

BAH’s study found that many portals are still clinging on to an outdated
revenue model that relied on advertising payments based in part on the
click-through rates. Banner ads accounted for almost 50% of all Internet
advertising in the second quarter of 2000 according to the Internet Advertising
Bureau (IAB) although click-through rates for banner ads actually fell more than
40% between October 1999 and October 2000. It is estimated that only 0.1% of
visitors to
portals click on banner-ads, yet Yahoo currently derives almost 90% of its
revenues from such ads.

Abraham Mathew, president, Ciol.com, says, “Dot-coms relying solely on
advertising revenues will be under a certain amount of pressure. According to
Binod Choudhary, VP and regional director, Rediff.com, “The nature of
advertising has changed with the focus clearly shifting away from plain vanilla
banner ads towards banner ads”. He pegs revenues from such ads at about 40%
of Rediff’s total revenues.

A question that comes to one’s mind here is that will portals having a
parent company fare better than those that don’t? Mathew feels, “The the
basic necessity of every portal is to have a very sound business model. However,
the presence of a healthy parent company definitely provides a cushion in tough
days.”

Adds Marcellus D’Souza, VP, corporate communications, 123India.com,
“Portals with influential parentage are constrained by the umbilical
cord  that binds them. Users in the free world want to read all angles to a
story and their insatiable appetite for information is not satisfied with just
one source.”

New branding opportunities

So with the focus shifting away from eyeballs to revenue generation, what are
the new marketing opportunities that are emerging?

D’ Souza says, "The creation of micro site branding related
opportunities, sites that are specifically related to a particular festival or
occasion. Branding opportunities as related to sponsorship of channels, which
specifically talk to the target group, are new advertising methods. New ad sizes
as communicated by IAB Standards are also an exciting opportunity."

Mathew feels, "There has been a definite shift in the marketing strategy
of dot-coms. Gone are those days when portals sunk in money to get more and more
eyeballs. Today the emphasis is on revenue generation and making profits.
Therefore there is a need to take a realistic look at expenditure and this has
led to a reduction in marketing spend." Choudhary talks about the
increasing revenues from the web solutions business, which stands at 20%, up
from 10% last year.

According to Gerry Bollman, senior associate, BAH, "Clearly, a revenue
strategy centered around banner ads promises little return, and threatens the
future financial viability of the portals. But no one should question the
potential of portals as an online marketing venue. Research and analysis
suggests that by employing alternative strategies, businesses can maximize the
yield of their marketing dollars, even reap order-of-magnitude
improvements."

Conclusion

Portals have a significant role to play in the media strategies of marketers
but advertisers should be prudent.

From their initial purpose of being gateways to the Internet to being a
destination by themselves, portals are still evolving. Wherever they go,
marketers will have to move along with them and re-align their strategies to get
maximum mileage from their favourite Internet engines.

Amit Sarkar in New Delhi