Keeping Those Portals Open

Americans need a place to go online, and most go to one of three places,
according to a recent survey by research firm IDC Monday.

According to the survey, 84 percent of U.S. online households go to either
AOL , MSN or Yahoo!
to check out the latest news, chat with friends or read their e-mails. But
getting more out of those customers, and providing services considered
essential (i.e., getting customers to pay), is the real trick for these
portal providers going forward.

Richard Villars, IDC vice president of Internet strategies, said the
success of the Big 3 depends upon more than just the delivery of page views
and new registrants.

“They must create a deeper relationship with their subscribers, touch more
aspects of their lives, and be more indispensable than any other medium,”
he said.

All three provide what’s now considered standard fare for a portal — news,
chat, games, an e-mail address, calendar application and address book —
but in the future, the dominant players are going to need broadband
offerings that appeal to a new crowd of always-on, high-speed users that
want to get their money’s worth.

Yahoo! is the only one of the Top 3 without a built-in base of paying
customers via Internet connectivity. Both AOL and MSN, as primarily dial-up
Internet service providers, have a recurring revenue stream from monthly
accounts, but Yahoo! has been a free-for-all portal since its inception.

According to Dewey Coffman, an ISP consultant, Yahoo! is in the best
position to migrate its existing customers into premium content. They,
like AOL and MSN, however, will need to come up with something to make
their service more compelling than the other.

“Yahoo! seems to have the more sophisticated users more willing to pay for
additional services,” Coffman said. “[But] as long as people can get similar
services for free, most people will switch over to the free service.
They’ll have to come up with services that are not available elsewhere,
offer them at extremely nominal fees.”

All three are in new territory when it comes to broadband, however, and all
are looking for ways to make a powerful entrance into the market.

MSN, for example, believes in co-branding deals with existing digital
subscriber line (DSL) providers like Verizon Communications
and Qwest Communications . In the case of Qwest, MSN took management
control over all Qwest DSL customers and allows them to put its portal
on the home pages. With Verizon, MSN has a tit-for-tat marketing agreement
for co-branded
DSL.

AOL, which has been quietly offering DSL throughout the U.S. for years and
owns Time Warner Cable (Road Runner), has recently stepped up its
high-speed outreach program. As part of a deal to get back some of its
cable TV properties, AOL also got a deal signed with Comcast and AT&T
Broadband (Quote, Company Info) to provide competitive
services on parts of the Comcast network.

Yahoo! has been busy itself, signing a blockbuster deal with SBC
Communications (Quote, Company Info) to essentially take over as the public
face of SBC broadband.

Perhaps because the portal doesn’t have an existing membership of dial up
users, Yahoo! has been focusing more upon broadband than the other two.
While the upcoming AOL 8 and MSN 8 both feature a new look and some added
streaming video and audio features, Yahoo! has been making the most strides
in getting ubiquitous applications out that will make the company
indispensable.

“I think the Yahoo! SBC partnership makes the best use of each company’s
core business and will transition more people to broadband than the
others,” Coffman said. “Just about everyone I know has a Yahoo! account and
I certainly refer people to news stories or articles I see on it. Yahoo!’s
new Webmail interface with video seems to be a broadband user only appear,
as does the new Yahoo! IM latest features.”

The portal introduced a “super Webcam” service that lets people on Yahoo!
Messenger hold a face-to-face real-time conversation at 20 frames per
second. So far, Yahoo! has more than six million Webcam users worldwide.