A Year Ago: The Internet is shrinking - report

A new study is good news for the biggest sites, but could mean fewer opportunities for Net startups.

Surfers are visiting fewer Web sites and spending more time with the ones they know at the expense of smaller sites, according to research by US analyst Media Metrix.

The findings have not only sparked fears that the boom in Internet opportunities may be over, but also that Internet stocks may begin their long awaited descent.

Commissioned by the LA Times, the survey of 40,000 subjects shows that people spend 20 percent of their time on the top 10 Web sites today compared to 16 percent a year ago and the amount of time spent at the top 50 and 100 sites in that period has also risen.

Head of financial research at Mintel Lance Close believes the shift in Internet use could mean a significant downturn in business opportunities as well as Internet stock value. "Potentially this could have a very negative effect on Internet stocks. It wasn't long ago that the Internet was thought to be a level playing-field full of potential giant killers. Now it seems, as in the offline world, brands are becoming vitally important."

Close believes a shift towards established brands has a lot to do with the public's trust in online services. "People are becoming more selective about online news, banking and shopping content generally. If you're going to open an online bank account for example, you're much more likely to go to someone you know you can trust than some start-up company." He thinks the report's findings may reflect a new direction for the Internet generally. "Information is wonderful, but it is also intimidating. The fact that search engines do not even cover half the Internet means that people are beginning to feel they will never find everything."

Mark Riseley, associate analyst with GartnerGroup Dataquest, points out that Mintel's findings contradicts previous research which indicated the popularity of leading Internet portals is waning. It also coincides with AOL's attempt to muscle in on the European portal scene with Netscape Online, launched Tuesday.

Risely believes the Media Metrix survey is representative of American Internet habits, not worldwide. "This [the report's findings] is distinctly possible in the US because they have unmetered Internet access," suggesting many users leave their machines connected at one site for long periods of time.

Riseley also suggests that increases in Internet uptake may also have a bearing on Net use. "A recent boost in the number of new users could also affect these results. New users tend to rely on portals to help them navigate much more," he says.

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