Magazine article Management Today

A Question of Portals

Magazine article Management Today

A Question of Portals

Article excerpt

With internet and e-commerce fever raging, everybody wants co be a portal. Is this wise? Will they make money? We pull back the curtain

Let's start with basics - what exactly is a portal?

In the early days of the internet, Yahoo! and its competitors (Lycos, Excite etc) were known as search engines or directories. As their business concept has evolved, they have become known as portals.

A portal is just what it sounds like - a gateway providing consumers with access to three of the four internet Cs: Content, Commerce and Community (the fourth C is Communication); and access for vendors of products and services to consumers and sales.

That's in the internet world. Used in the same sense in the pre-internet world, Tesco is a commerce portal for grocery products; Cosmopolitan is a content portal for women's lifestyle and fashion; and Channel 4 is a portal for niche TV programming.

How will portals generate revenue and profits?

Firstly, vendors pay to advertise their brands - on banner ads, page ads, or search listings. Portal ad revenues depend on attracting consumers to their site, with good content and community services - a good example is Cosmopolitan.

Secondly, portals share in the revenues from e-commerce from variable commissions or fixed placement fees, or by becoming e-commerce vendors themselves and earning the gross margin on sales.

A hot online topic is the merging of 'content' (with its advertising revenue model) and 'commerce'. Ads on content pages now invariably click through to vendors' e-commerce sites, and advertising is being priced per click-through or per completed transaction.

Isn't this all rather reliant on ads? What if consumers find that off-putting?

Another way for portals to make money is by charging consumers directly for subscription or usage. The 'subscription model' was pooh-poohed in the early days of the internet, and now even the AOL ISP-plus-portal subscription model is under heavy attack. But as consumers start to want more quality control, editing and customer service online to manage time-wasting garbage overload, it could bounce back. Glossy mail-shot property magazines survive on advertising, but business professionals fund The Economist through subscription; hotel rooms provide free city listing magazines, but regular travellers buy Zagat's in the US or Michelin in France for restaurant recommendations. …

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