Research company Jupiter Media Metrix found that the number of companies controlling 60 percent of the time people spend online plummeted sharply from 110 companies in March 1999 to 14 in March 2001. In addition, 50 percent of Internet usage is spent on sites and services owned by four companies: AOL Time Warner, Microsoft, Yahoo and Napster.
Analysts have long predicted such consolidation. But the new numbers show that a handful of Web companies are already turning into powerful giants, possibly undermining the diversity offered by the Internet. Dot-com shut-downs and acquisitions play into this, analysts say. But the attraction to these few sites--despite an increase in the number of Web users--may be proof that networks are emerging as one-stop shops for consumers.
"We all know companies have gone out of business, and we know that there's been an incredible amount of acquisitions that have gone down," said Mark Mooradian, a senior analyst at Jupiter. "What was surprising is just how striking the difference was in such a short period of time."
In March 2000, for example, 60 percent of Web user minutes was stretched between 40 companies. As that number dropped to 14 companies in March 2001, most sites came from a blend of traditional media companies, interactive companies and companies--including Juno Online Services, eBay, the Excite Network, iWon and Lycos--that traditional media partly owned or controlled.
In a narrower look, the number of companies controlling 50 percent of Web user minutes online declined by nearly two-thirds, from 11 to four. AOL Time Warner hit the top of the list with 32 percent of the minutes, followed by Microsoft with 8 percent, Yahoo with 7 percent, and Napster with 4 percent. Two-thirds of AOL Time Warner's share, however, is derived from services such as instant messaging, email and e-greetings. Such services were not included in the Microsoft or Yahoo figures.
This consolidation highlights the numerous Internet marriages over the last two years. For instance, in October 1999, Excite@Home acquired online greeting card site Blue Mountain Arts for about US$780 million in cash and stock. Then at the beginning of this year, America Online and Time Warner completed their historic merger.
The report also draws attention to the increasing number of shutdowns. According to research and advisory company Webmergers, at least 55 Internet companies shut down in April, bringing the total to at least 435 casualties since January 2000. Webmergers added that of those 435 companies, nearly half of those, about 211 companies, fell in the first four months of 2001.
Most of the shutdowns were e-commerce-related companies, but Webmergers said the Internet shakeout is beginning to affect other sectors, such as Internet consulting and Web access.
"The Internet is not this slam-dunk poster child of just a vacation for deregulation," Jupiter's Mooradian said. "Yes, it offers diversity, but be aware that the majority of traffic is controlled by a very small number of companies."