December 26, 2000, 9:55 AM

The Portals Have Landed

(Page 2 of 3)

Revenues driven by portals will remain close to current levels for several years, Jupiter predicts. The company projects that total revenues from e-commerce-what people buy from merchants as well as stock trading fees-will skyrocket, from $7.9 billion in 1999 to $43.2 billion by 2002. But the portion of commerce revenues generated by the portals, which Jupiter puts at 18% for 1999, will grow to only 20% by 2002, Jupiter says.

When portals set up advertising spaces for merchants, they have to consider the needs of merchants like Eddie Bauer, which already have strong brand identities, as well as start-up companies like Cooking.com.

“We have to ask ourselves, What would a mature retailer want from us? What would a small merchant want from us? What would a big auction house require from us?” says B.D. Goel, senior vice president and general manager of commerce at Sunnyvale, Calif.-based Infoseek, which operates the Go Network in partnership with Disney. The portal, which gets 20 million unique visitors every month, wants to be an “intermediary for e-commerce,” Goel says.

Other portals are working to meet changing e-commerce needs by launching new initiatives and developing new strategies:

MSN.com, which shepherds about 40 million users a month through the Web, is working to improve its shopping offerings. The goal is to make MSN “a great place for people to learn about products and spend their money wisely,” says Kevin M. Wueste, general manager of commerce services at Microsoft Corp. in Redmond, Wash.

The portal has deals with about 60 retailers-Godiva Chocolatier is a featured merchant-and enables people to click through to those sites to buy products. The network plans to add value to those arrangements by helping consumers research product categories, find what they are looking for, compare prices and then actually make a purchase.

MSN is focusing on retailers, too, by building new merchandising opportunities, such as building space within news stories to sell products, Wueste says. A story on a new fashion trend, for instance, may offer the ability to buy the item through one of the portal’s retailers.

“Portals can be like drinking from a fire hose,” Wueste says. “You have a wide, wide audience that might not be as targeted as retailers would like it to be.”

Lycos Network, which has 31.9 million visitors monthly, also offers retailers an integration plan that sprinkles products across relevant parts of its site. Music store promotions, for instance, pop up in the entertainment areas of the portal.

Lycos’ plans for e-commerce include selling products directly through the Lycos store and streamlining exchanges between retailers and consumers, according to Jeffrey S. Bennett, vice president of electronic commerce at the Waltham, Mass.-based company. “The next evolution will be to offer one-click purchasing across thousands of different buying opportunities.”

Excite, which has 20 million users, is working with Intel Corp. to build a huge database of products and product reviews that will be enhanced by personalization and product comparison technologies.

Retailers will be able to choose from a range of deals, says Jon H. Zeitlin, senior product manager for commerce at Redwood City, Calif.-based Excite. “If they want to make a big splash and be in the busiest parts of the service, we would develop more of an advertising relationship.” Excite plans to work with merchants rather than selling directly to consumers, Zeitlin says.

America Online, Dulles, Va., with 16.9 million users worldwide, recently announced it will improve shopping services on its site as well as within Netscape’s Netcenter and CompuServe, both of which it owns. The new services will include improved personalization features and product search capabilities.

Yahoo!, which has 31.3 million visitors each month, has developed a shopping channel that aggregates products from the more than 4,500 Web merchants who use Yahoo! Store software. Editors comb through retailers’ offerings, picking a diverse lot of products to offer in the shop-ping channel. Yahoo! Store merchants also can buy advertising within the shopping area and elsewhere. “What we do is so broad, it would be difficult for any one merchant to offer the same customized experience across boundaries,” says Tim Brady, vice president of production at Santa Clara, Calif.-based Yahoo!

The portal’s e-commerce focus extends beyond its shopping channel, with Yahoo! Auctions and Yahoo! Classifieds.” “E-commerce is threaded throughout the network,” Brady says. “It is critical to the success of the company.”

Trapping the consumer

As merchants examine, test and think about portals’ new ideas, they are greeting some with enthusiasm and others with trepidation. Cooking.com, for instance, is participating in Yahoo!’s online store environment, which aggregates its merchants’ products under one umbrella store. But it’s selling only a few items as a test with certain reservations.

“Companies like Cooking.com go to great lengths to create unique shopping and customer service experiences in our categories,” Randall says. But when a shopping cart is within a portal, that means the customer doesn’t go through to the Cooking.com site.

She suggests that the portals are infringing on those benefits by keeping customers in their own environment, and that price comparisons don’t deliver a good customer experience for any products beyond commodity goods, such as books or music.

Portals’ moves to become
e-commerce players themselves are causing Eddie Bauer to re-examine some of its marketing deals with portals as well. “Retailers’ future relationships with portals will be highly dependent on whether the portals are competing with the retailers,” says Neuman.

Portals argue that there are benefits. Lycos has been involved in several direct selling promotions, offering such things as Star Wars merchandise to people using the site.

Surfers = shoppers

Lycos isn’t competing with merchants when it sells products directly, says Bennett. “Direct selling is highly complementary to what we have been doing with merchants because it expands the e-commerce model,” he says. “We think it’s a great service for our consumer base to be able to get things directly while they’re with us.” Even so, Lycos has a policy not to sell any products sold by retailers guaranteed exclusive positioning on the portal.

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