Portals Return to Search for Niche
Most Web search engines have come a long way in their search for profits, from simple sites that helped people find their way around the Internet to bazaars of news, weather, shopping, e-mail and chats.
But as serious ad revenues have begun to dry up for nearly all full-service portals but Yahoo, MSN and America Online, the search for profits has come full circle.
Some sites that began as search engines are scaling back and becoming search sites once more.
“The big battle in the portal business is over. The Big Three have won,” said David Marks, a Gartner Group analyst. “The next battle will be over who can find the best remaining niches out there.”
Lycos, Excite, Infoseek and AltaVista had their heyday in the mid-1990s, when people were getting acquainted with what was new online.
Eventually, these so-called search engines added features meant to persuade visitors to hang around longer. The search engine thus begat the portal. And the portals that attracted the most users--the “stickiest” in Web parlance --earned the most advertising dollars.
Until about six months ago, that is, when investors lost their appetite for unprofitable Net companies, and Web site ad budgets began to slide.
If the reshuffling plays out as many anticipate, the Web might end up looking a lot like television--a handful of mass-market networks in Yahoo, MSN and AOL, and an array of specialty sites.
The evolution doesn’t necessarily mean this will be a prime business for established media firms, either.
NBC, for instance, hoped to develop a successful portal in NBCi, but the business has sputtered so far. Last month, NBCi--created from the former Snap.com portal--laid off 170 employees, or about 20% of its work force.
Technology pioneer AltaVista Co., meanwhile, has returned to its roots. Even as the Palo Alto-based company spent millions of dollars adding attractions such as sports news, 93% of its traffic initiated the visit with a search. As they have done since AltaVista launched in 1995, the vast majority of visitors were going to AltaVista primarily en route somewhere else.
The pattern ultimately led the still-unprofitable AltaVista to conclude it stands a better chance of making money by focusing on driving traffic to other sites.
“Search is in a renaissance,” said AltaVista Chief Executive Rod Schrock, whose company laid off 225 employees--one-third of its work force--last month. “People are starting to realize what a critical element it has become in the entire Web experience.”
Perhaps.
Surveys consistently rank search queries as the second most popular activity on the Web behind e-mail.
Analysts believe two of the Internet’s other leading portals, Excite and Lycos, also are prime candidates for reorganizations.
Excite’s parent company is looking for a new CEO after last month’s announcement its current leader, George Bell, was stepping aside.
Lycos is in the process of being bought by Spanish Internet service provider Terra Networks.
So what does a search engine need to do to make money?
Simple. Sell searches to other sites and mimic the telephone industry’s Yellow Pages by charging fees for prominently displayed listings in search results. AltaVista has about 1,000 license agreements worth an average of $100,000 apiece.
“Stickiness used to be a mantra for the portals,” said Marks of Gartner Group. “Now they are starting to realize that it’s OK to send people to other sites, as long as they can get them to come back the next time that they are looking for something.”
