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The Great Portal Payoff
By Horacio D. Rozanski and Gerry Bollman
2/22/01
As surfing habits change, portals that are dependent on banner ads for revenue are getting pinched. But these portals can fix their ailing business model, if marketers rethink how they use them.
In the world Wide Web's early days e-commerce was the bull's-eye, and portals like Yahoo and AltaVista were the arrows to it. Portals placed banner ads and page links in front of Web surfers, who with one click would be instantly transported to an electronic storefront. But like much emerging e-business theory, portal power crumpled against the relentless blows of economic reality.
Between October 1999 and October 2000, click-through rates fell more than 40 percent, with only 0.1 to 0.2 percent of page visitors clicking on banner ads at top portal sites. This has bred today's conventional wisdom that portals have little place in consumer marketing plans.
We beg to differ. Our research suggests these one-time gateways are no longer Web way stations. Today's portals are destinations — sites with content and commerce that attract users in the same way large-circulation magazines and television networks do. We believe the portals' fortunes can rise again, but only if consumer marketers change how they use them. The solution is simple and low tech: It's time to banish the banner, and brandish the brand.
A Familiar Place
Since the birth of the commercial Web, portals have been at the center of users' Internet experiences. At first "portal" was synonymous with "home page," and later portals became equated with search engines. To this day, all brand-name portals are based around search engines or directories, but their services and appeal vary. AOL is a portal, yet its popularity derives in no small part from its proprietary online communities. Disney's vanishing Go.com had, befitting its parentage, an entertainment flavor. Still others, like Google and HotBot, remain true to their roots in search.
Recent exclusive research by Booz•Allen & Hamilton of click-stream data provided by NetRatings suggests that, as a site class, portals remain the most familiar places on the Internet. According to analysis of 1,093 high-frequency users in July and August 2000, virtually all users — 98 percent — visited a portal at some point, compared with 80 percent who visited entertainment or information sites, and 43 percent who tried financial sites. Portal traffic, in short, dwarfs that of other Web site categories.
In our sampling, 60 percent of user sessions included a visit to a portal; by contrast, consumers went to entertainment sites only 22 percent of the time they accessed the Web. News and information sites were visited in 20 percent of user sessions, while shopping sites showed up in 17 percent, and sports sites in only 5 percent. (See Exhibit 1.)
Business Model 1.0
Most portals built their businesses on banner advertising, which generated revenue according to the number of click-throughs, a model that matched the needs of marketers and portals. The portals' main audience sought information, and ads could be triggered based on searches consumers requested. Portals also had the ability to identify consumers by interest and, to a degree, by demographics. Through banner ads, the first generation of portals could deliver audiences directly to marketers' Web sites in a way no other medium could equal.
This model made some sense as long as portals served as gateways. But the reliance on banner advertising as a revenue source became increasingly misguided as consumers began changing the way they used portals. Today portals' function as a Web on-ramp is low: Roughly half the participants in our survey said they used portals as gateways to other sites. Furthermore, the analysis shows that although users employed portals' search engines in one-third of their sessions, very few Web sites — only 6 percent — are accessed via such searches.
This may appear contradictory, but it actually underscores users' familiarity with the Internet, and their tendency to return to the places they know. A typical cruise on the Web is becoming, for most people, a series of visits to friendly local pubs, with an occasional dive into a new saloon. And, for many, the portal is the coziest hangout of them all. Users spend an average of 4.35 hours per month at portal sites, which is three times more than they spend at shopping or entertainment sites. (See Exhibit 2.)
