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The economics of portals

Even the smallest portal plays a big role in the Web's evolution.

December 17, 1998
Web posted at: 11:20 AM EST

by Tom Spring

(IDG) -- In 1997 we called them search engines. Today we call them portals. And now market research firm the Meta Group has minted three buzzwords to divvy them up, as "uber portals," "portacles," and "portlets."

The Meta Group isn't hoping these terms stick. The new names are just part of a fresh look at the economics of portals and how cyberspace is shaping up. The researchers predict the number of major portals will shrink to only a few: America Online, Microsoft, and Yahoo. But the number of "boutique" sites will explode.

The three big Web gateways, or uber portals, will be the Goliaths of the Web, capturing most general-interest Web surfers. They'll attract the most eyeballs and ad dollars.

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In their shadows will lurk hoards of portacle Web sites like,, and But far from struggling, these sites will continue to thrive, says Alexis DePlanque, analyst with the Meta Group, Stamford, Connecticut. She addressed the so-called portalnomics issue at a teleconference Tuesday.

"Right now, everybody is trying to get their ads on Yahoo," DePlanque said. But advertisers are shifting marketing dollars to specialized sites that cater to target audiences. This way advertising can be focussed more precisely on a particular user demographic.

Size isn't everything

The larger the Internet becomes, the less important size is to a portal's success, according to the Meta Group study. More important are quality content, relevant partnerships, and personalization.

Online music retailer doesn't attract nearly the number of views as the Microsoft Network. But because it ably attracts engaged, repeat visitors who spend increasing amounts of time at its site, is worthwhile to advertisers.

"Instead of briefly landing on the site and then moving off to some other corner of cyberspace, these visitors are sticking around," said Kip Martin, senior research analyst at the Meta Group.

These medium-size portals, or portacles, will play a key role helping corporations succeed online, Martin said. Through content partnerships and e-commerce agreements, sites like the used car store Auto-by-Tel serve as a hub for their industry.

Small but specific

At the bottom of the portal food chain are so-called portlets. Sites like Martha Stewart, Virtual Vineyards, and are the most narrowly focused of sites. These smaller, nimbler firms provide better creative services than their larger counterparts. They work effectively with like-minded Web sites and businesses. Boutique sites can offer handholding that larger firms can't.

"No single vendor provides the best of everything," DePlanque said.

The Yahoos can beat the little sites in technical skill and systems integration any day, but they often lack creative content and design capabilities, DePlanque said.

The bottom line for large corporations is: AOL and Yahoo have a lock on the broadband consumer side of the Web, but an increasing number of vertical and smaller portals offer ample opportunity for companies to raise their visibility online.

Through affiliate and sponsorship relationships with these smaller, targeted portals, corporations can look beyond banner advertising as a way to boost brand awareness and lure traffic to their own sites.

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