March 15, 1999
The problems with portals: How much value do they really provide?
By Bob O'Donnell
Talk to anyone in the Internet industry and they'll tell you that Internet portals are
what's hot. It seems everyone is trying to create a Web site that is compelling enough to
become your home page and the door through which you enter the Internet.
All the major search engines, several large media companies, and even hardware and
software vendors are trying to out-do each other in creating these supersites. Free
e-mail, online shopping, news feeds, stock quotes, instant messaging, and online calendars
are just some of the many services that these sites feature (or will soon be adding).
The trouble is, I don't really see the point. I mean, purely from a logical
perspective, how much value is there in being a door through which you pass on your way to
something else? Some of the services these sites offer can be useful and the right
combination may well lead people to choose that particular site as their home page or
their preferred search engine. But other than snagging your eyeballs for a few seconds (or
maybe a few minutes), how much more value do they really provide?
Most of the Internet surfing that I do is to specific sites with the content or
information that I want or need. Sure, I often use the portals as a way to get to where I
want to go, but the total percentage of my online time spent at any one portal is
minuscule.
To make a real-world analogy, many portal sites are like trains stations or bus stops
where people temporarily congregate on their way to work. They serve a useful purpose, and
both types of "sites" take advantage of their status from a business perspective
by providing opportunities for advertising. Some train stations even include
"services" such as newsstands and coffee shops to make a few more bucks off the
people who pass through the station.
But in the overall perspective, they play a tiny role in the lives of even the people
who use them on a regular basis -- let alone those people who don't use them at all. And,
arguably, so do most of the so-called portals. Of course, my analogy falls apart when you
realize that there aren't any companies trying to buy the big train or bus stations at
several billion dollars a pop, yet the online equivalents are easily fetching these types
of outrageous prices.
A related concern about the portals is that virtually all of their revenue seems to
come from advertising. While that's certainly a viable business model for small or midsize
businesses -- such as this magazine -- it can't possibly sustain the large companies that
many Internet portals are now in the same league with (at least in terms of company
valuations). Long-term profits, in particular, seem very difficult to maintain on
advertising revenue alone.
Of course, like all Internet ventures, there's that seemingly never-ending supply of
potential future growth driving these companies forward. But I certainly don't understand
the value of a pass-through connection.
©
Copyright 1999, by InfoWorld Publishing Corp., a
subsidiary of IDG Communications, Inc. Reprinted from InfoWorld,
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