Up to now, the Internet has been a frustrating place for traditional media giants. Their Web sites struggled to crack the top 10, which was dominated by Yahoo, Netscape, AOL and Microsoft.
So now some are resorting to an old-fashioned strategy. If you can’t beat
’em, buy ’em. “This is kind of like 1950s television” when networks were
establishing their control of the new medium, says Mike Slade, president
of Disney’s Buena Vista Internet Group.
The most interesting, and risky, competition lately is taking place in a hot
new business of Internet portals.
Those are the starting blocks of the Internet–the directories and search
engines that help users find the Web site needle they want in the
cyberspace haystack. And the portals, or Internet gateways, are larding
on proven attractions including news, weather, sports, free e-mail and
entertainment.
“Everybody wants to come after us,” says Jerry Yang, co-founder of
Yahoo, which attracts more than 31 million different visitors each month.
Walt Disney on Thursday agreed to buy 43% of Infoseek, which attracts
more than 13 million visitors, in a deal valued at $473 million. That
followed by a week NBC’s decision to pay $32 million for a minority
stake in Snap, a new service with about 2 million visitors.
The dealmaking may still be in its infancy.
“NBC validated media on the Internet,” says CNET Chief Executive
Halsey Minor, who also runs Snap. “Once the first player moved, the
others have to respond.”
CBS is said to be talking to search engine Lycos, which gets 11 million
Web users. AOL just rejected an overture from AT&T, which was
willing to pay more than $19 billion.
And many analysts believe it’s just a matter of time before other major
players make announcements. Microsoft has yet to establish itself as a
major Internet media company despite its fledgling online service MSN,
its MSNBC site with partner NBC, and its travel, entertainment and
car-buying sites. Yet Microsoft is determined to become an Internet
power with a portal called Start, which begins this year. Time Warner is
thought to be interested in creating its own portal with easy connections
to the company’s hundreds of sites in subsidiaries including CNN, Warner
Bros., the Cartoon Network, Atlantic Records and DC Comics.
The recent deals seem to make sense for the giants. They build on their
already large presence on the Internet. NBC is teamed with Microsoft at
MSNBC. Disney’s ESPN and CBS have popular destinations for sports
news.
“The investments are good hedges for traditional media companies,” says
Hambrecht & Quist’s Paul Noglows. “We’re not talking about a lot of
money here.”
In fact, the cash outlay for portals is relatively tiny by big media
standards: NBC’s initial stake in Snap could have bought a small radio
station, two showings of Titanic or nearly three episodes (plus reruns) of
ER.
The payoff could be breathtaking for portals that attract the most visitors.
It’s widely thought that users who start their Web forays at those sites
tend to stay there–making them attractive to advertisers eager to snag
their attention. Internet advertising is expected to rise from about $500
million in 1997 to $6.5 billion in 2001. Sites also get a piece of the action
when they lead viewers to companies that sell goods and services on the
Internet. That could blossom into a $300 billion-a-year business by 2002.
“The next big media networks are being built on the Internet in real time,”
says Netscape Communications co-founder Marc Andreessen.
Netscape, which once relied on sales of its Web browser, now has
staked its future to developing its Web site, NetCenter, as an Internet
portal. Last year, NetCenter accounted for 18% of the company’s $534
million in revenue. “We will need the kinds of promotion and branding the
big media companies offer.”
