RealTime IT News

Top Portals in Europe "Will Choke the Rest" -- Forrester

[London, ENGLAND] At research company Forrester they're calling it "Europe's Portal Squeeze" -- the phenomenon in which Web traffic is favoring the top few portals at the expense of all the others.

There is nothing new in the idea of "winner takes all," especially in the intense competition online for visitors. But Forrester says the situation is becoming more extreme as every month passes.

In the U.K., the top three portals already take 14 percent of the traffic, and this is nearly three times the traffic of the next 10 portals combined.

France and Germany, says Forrester, are moving toward the current situation in the U.K., with many smaller portals finding themselves gradually edged out in the competition for eyeballs.

"In Europe, a mix of U.S. invaders like AOL and Yahoo!, plus national telco-linked portals like Terra will win the portal shakeout," said Forrester analyst Hellen 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," added Omwando.

Forrester paints a grim scenario for some of the lesser portals. It says that while several of them will "enjoy momentary victories" having survived the shakeout by 2002, they will lose revenue as marketers divert budgets to specialist sites, marketing services providers, and new distribution platforms.

"As dotcom venture capital funding dries up, marketers will tighten their belts and slash spending at second-tier portals," warned Omwando, adding that bricks-and-mortar companies advertising online will prefer top-tier portals because they guarantee the most visitors.

Potential losers include World Online and AltaVista, according to Forrester. Potential winners are Terra, already dominant in Southern Europe, and T-Online which has the money to expand by acquisition.

Forrester also suggests that Wanadoo will thrive "because of the momentum it will gain from cross-promoting access and content from pan-European sister portals like Voila."

A big factor affecting the portals will be the growing use of mobile access to the Internet. Again, Omwando makes a stark warning, saying that 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 euros (US $4.25 billion) in 2005, yielding meager sales commissions," said Omwando.

Portals will have to choose whether to change their business models, consolidate with peers, be taken over -- or simply fold, say the researchers.