The portal wars 2.0

In the bubble days of the Web, the game was all about aggregating eyeballs. AOL, Excite, Yahoo, Snap!


In the bubble days of the Web, the game was all about aggregating eyeballs. AOL, Excite, Yahoo, Snap!, Lycos, Netscape, MSN and a few others tried to carve out virtual territory in the first Internet eyeball rush. The first Web portals focused on search and content aggregation, adding e-mail, instant messaging and groups.

At the beginning of 1999, Google was just a fledgling search engine company with eight employees. In fact, legendary venture capitalist Vinod Khosla of Kleiner, Perkins, Caulfield & Byers said he tried to get Excite to acquire the technology and services of Sergey Brin and Larry Page five times for about $1 million before he gave up, and we know how the rest of that story turned out.

Today, AOL, Google, MSN and Yahoo are the big four left standing at the dawn of the 21st century, and we have barely tapped the potential of the Internet. Within a decade they have become major brands with hundreds of millions of users globally visiting their pages and consuming services. Amazon and eBay, for example, represent more specialized portals and established brands, but it's not difficult to imagine mergers that combine various brands into even bigger monoliths.

Each portal has different strengths and weaknesses. AOL and Yahoo seem more focused on become not just a place for communications (e-mail/calendaring, IM, blogs), social networking, search, shopping, media sharing, blogs and personalization, but also for content creation and distribution, from news and blogs to first run movies. Both Yahoo and AOL, with its Time Warner connection (at least for now) seem to have ambitions to seed, create and produce the next generation of Web programming (IPTV) and disrupt Hollywood norms and the media establishment, which could also lead to some interesting mega mergers and acquisitions. 

Google hasn't focused as much on content aggregation and creation, but is catching up on the communications front with GTalk, calendaring and other fronts. Google co-founder Sergey Brin contends that Google isn't interested in content creation: "We fundamentally believe in giving people access to content, not producing it. If you search for stock symbol on Google, the first link could be from Yahoo Finance. We want to send people to best sites. We are really not about trying to create all of our own content to keep them on Google; we are about sending them off." Brin's perspective on content could change if search revenues alone aren't enough to maintain growth. It could be that Google would prefer to focus on being the infrastructure provider for the planet.

MSN is aggressively pushing it own search, adCenter and personalization, and will leverage all the deal-making efforts of Microsoft on the content distribution, digital rights management and identity management fronts.

Next up for the all the players are rich Web-based applications, such as desktop publishing, wikis and project management (check out 37signals and Writely), and more programmable Web mash-ups.

To a large degree, e-mail, calendaring, instant messaging, blogs, feed readers, social networking, comparative shopping services, media sharing, music, gaming, storage and other user services are becoming commodities, and more often than not, free. Third parties may have better services, but it's hard to compete for attention, and revenue, among masses who have chosen one or more of the majors as their personal services provider. If an external service is really good, one of the four or others on the make will scoop it up or at some point duplicate the functionality (sounds like Microsoft's modus operandi before it was throttled back by the DOJ or Apple's with services like Konfabulator, which Yahoo acquired).  In other words, business as usual.

As Yahoo CEO Terry Semel said, the current phase for the Web portals is more about deepening the relationship with the audience than just page views and unique users. He talks about knitting together Yahoo's myriad services, monetizing content--including user-generated content--and developing new models for content creation and distribution. 

The portals want users to identify with them, like they do with designer labels and sports teams, with a deep two-way relationship. You might be a Yahoo Mail, Yahoo and AOL IM, Google search, Bloglines RSS reader, Amazon, eBay user, but the portals want to cultivate more pure, deeply engaged users, focusing on convenience, personalization and least 'good enough,' comparable sets of services.

Personalization and social networking are becoming less burdensome for users, but they still have along way to go. A single log-on for services is a good step, but homogenizing services so they all look and feel the same can sap of the stuff that made it sticky for users in the first place. And, the more sophisticated Web users will want to be in control of their own identity and the data trails of their online activity. Without open standards, people end up in walled gardens, with all of their preferences locked into a particular portal (see In other words, I want to take my Amazon data trail to another site, or my Yahoo personalizations to another portal, so I don't have to start from scratch.

There is still room for another Google, a small company or a few college students who figure out how to do search or some other critical component for the Internet Age right the next round. Even with well heeled Google, Yahoo and Microsoft sucking up the high IQ software engineering talent in the world for their labs, breakthrough innovations can come from anywhere in the connected world.

This next phase, what we call Web 2.0 for lack of a better term, won't be like ABC, CBS and NBC competing in the early days for TV viewers. Passive engagement with a few channels is far less complex and disruptive to existing business models than the interactive, digital, two-way converging medium that is evolving, and which no one "owns."

The competition among the big four, as well as with more specialized portals, has shown the benefits of competition and rapid iteration, although the excess of half-baked betaware is getting tedious (such as the recent Google's RSS reader). The danger is that the competition driving innovation will be muted by consolidation.  On the other hand, the tools of production and distribution are in the hands of users. If the portals start throwing their weight around, alternatives, not to mention the bloggers, will rise out of virtual space to challenge their dominions...