Most Popular Portal Sites Here are the top 10 Web "portals" for computer users at home. The reach indicates the percent of Web users that visited each site at least once a month.* Rank* Web property Reach (in Aug.) (by percent) 1 AOL.com 45.4% 2 Yahoo sites 41.2 3 Microsoft sites 38.7 (Microsoft Network-24.0) 4 Lycos 29.9 5 Geocities 25.7 6 Excite network 25.2 7 Netscape 24.8 8 Walt Disney Co. Online 17.5 9 Infoseek 16.3 10 Time Warner Online 13.9 *Repeat visits are not counted. If a site has a 2 percent reach, it means that 2 percent of Web users visited that site in a month.

By Rajiv Chandrasekaran
Washington Post Staff Writer
Sunday, October 11, 1998; Page H01

MOUNTAIN VIEW, Calif. – As an early settler on the digital frontier, Jason Paulson used to make dozens of online errands to get his daily information fix. He'd go to the Weather Channel's World Wide Web site to check the week's forecast, ESPN SportsZone to follow the New York Mets and Yankees, the Motley Fool to grab stock quotes, CNN to read the headlines, and Mr. Showbiz to browse movie reviews.

Nowadays, Paulson doesn't do a lot of virtual traveling. A marketing associate for a medical-device manufacturer based here, he begins his daily quest at the Internet's version of a Wal-Mart: Excite Inc.'s Web site. There, on a personalized electronic page, he checks his stocks, his sports scores, the weather and news headlines. He reads message boards and occasionally drops in on chat rooms. All told, he spends the first 25 minutes of his time online within the Excite site.

That's just what Excite wants. Once a fledgling service that just helped people like Paulson search for other places to go on the global computer network, the company and others like it began earlier this year to offer detailed news, weather and financial information, as well as free electronic mail accounts and classified ads, to encourage visitors to hang around for a while before asking for directions to another site. The still-not-profitable Excite has lined itself with flypaper for a simple reason: If people stay longer, the company can display more advertisements – and rake in much-needed revenue.

"We used to think that the faster we pointed people to other sites, the better we were doing," said George Bell, Excite's chief executive. "Now our strategy is like a walled garden. There's should be plenty of ways to get out, but there should also be plenty of reasons to stay in."

Excite and others transformed themselves into Internet "portals." Microsoft Corp., Netscape Communications Corp., America Online Inc., Yahoo Inc. and Compaq Computer Corp. are among the other big players that have frantically spent tens of millions of dollars to morph their Web sites into similar starting points for Internet surfers.

Big media companies also have joined the fray, with Walt Disney Co. paying $70 million to buy part of Infoseek Inc.'s site, and General Electric Co.'s NBC unit spending $165 million to purchase a controlling interest in Cnet Inc.'s Snap site. In addition, Time Warner Co. and Rupert Murdoch's News Corp. are looking to build or buy similar services.

Technology and media companies are rushing headlong into this enterprise because they believe portals are the way to create a dominant brand in the diffuse world of cyberspace. By augmenting their traditional search services with a wealth of other content, the firms are trying to corral a critical mass of visitors and advertisers, making themselves the ABC, NBC or CBS of the Internet.

"This is a very important phase in the growth of the Internet," said Mike Homer, a Netscape executive vice president who is leading the company's portal efforts. "We have the opportunity to become one of the primary destinations for a lot of the traffic" on the Web.

Consider these developments:

Disney said recently that it would launch a portal, to be called the Go Network, by the end of the year. The site will have the advantage of being able to display exclusive content from Disney's corporate subsidiaries, including ABC and ESPN.

Microsoft has been assembling many of its Web sites – including the Expedia travel-planning service, the CarPoint auto-buying service and the Investor personal-finance service – into a unified portal called MSN.com that the company can promote through its Internet browser, which is part of the popular Windows computer operating system.

NBC has been touting Cnet's Snap service through prime-time advertisements this fall, making the most concerted effort to date to use the power of traditional media to promote the Web.

AOL redesigned its AOL.com portal site with new tools for chatting, sending e-mail and creating personal home pages.

Netscape on Thursday unveiled a service that lets businesses create custom portals using content and features from Netscape's site, in exchange for purchasing the company's software to operate such a site. "We think 1999 is going to be about thousands of specialized portals, which will provide expanded services and benefits of all kinds for businesses and consumers," Netscape chief executive James Barksdale said during his keynote address at the Internet World trade show in New York last week.

The intensifying race hasn't escaped investors' notice. In spite of the turbulence in technology stocks in recent weeks, they've bid up portal contestants' stock prices to thin-air heights. Yahoo's shares, for instance, have shot up more than 250 percent this year, from $29 in January to $105.62 1/2 on Friday. Excite's stock price has jumped as much as 250 percent in the past seven months, and America Online's has increased almost 120 percent, from $42.50 in January to $92.31 1/4 on Friday.

A growing number of financial analysts and technology specialists, though, worry that portals are far from a gateway to assured riches. Although many of the services have won over thousands of users like Paulson, they say it's not clear that millions of other Web surfers will take kindly to the increased "stickiness" of the sites. And, they add, there's no way the online advertising market can support more than three or four major sites. The rest will have to redefine themselves once again, perhaps into small, niche-focused offerings.

"There's a big shakeout on the horizon," said Chris Charron, an analyst with Forrester Research Inc., a consulting firm in Cambridge, Mass. "Everyone is getting in the starting blocks for a high-stakes fight."

Desperate Beginning

In late 1996, Dulles-based AOL, grappling with a steep drop in its stock price and jump in member cancellations, decided to abandon hourly access charges and offer subscribers unlimited use of its service for $20 a month. To become profitable under the new business model, though, the company had to ensure that its 6 million members didn't spend the bulk of their online time on Web sites where they wouldn't see AOL's advertisements.

The solution, AOL executives decided, was to make the path to the Web a little stickier.

They started pelting users with advertising billboards when they first signed on. They made sure to feature events and services within AOL's gated community on the welcome page. And when a user started AOL's Web browsing software, they would be forced to visit the company's home page.

Critics questioned the strategy, but many customers didn't seem to mind. AOL's proprietary services, from chat rooms to e-mail and news blurbs, were heavily promoted. It's the same way today. AOL now has more than 13 million members, most of whom still spend the bulk of their time online within AOL's community.

AOL's success was the envy of "search engines" – Web sites such as Yahoo, Excite and Infoseek. They were the first destination for many non-AOL Web surfers, but they largely pointed people to other sites. Although they, too, bombarded users with advertising banners atop the pages listing search results, it wasn't a very profitable concept. Visitors rarely viewed more than a few pages before moving on.

So, over the past year, the search engines started adding things: news headlines, stock quotes, sports scores and weather reports. Those that didn't have them before created AOL-like "channels" – with subjects such as travel, investing and health – where visitors can view material the site, or its business partners, have compiled. Perhaps most important, the search engines added some of the features that have made AOL so successful: e-mail service, chat rooms and message boards.

The overhaul has had a noticeable impact. A year ago, visitors spent more than 90 percent of their time on Yahoo either searching or prowling through the service's category listings of Web sites. Today, users devote 40 percent of their time to accessing e-mail and content housed on the site, said Jeff Mallett, the company's chief operating officer.

"There's just too much happening on the Web," he said. "It's just human nature that people want to turn to central place to turn to pull everything together."

While the search engines were refashioning themselves into portals, so too were a host of other popular sites that attract people heading out to surf, most notably those run by Netscape and Microsoft.

Both Netscape's Navigator and Microsoft's Internet Explorer browsing software automatically takes a user to the respective company home pages unless otherwise instructed. Both firms figured they could use the popularity of the sites, which used to be filled largely with company boilerplate, to generate advertising and electronic-commerce revenue.

Joining them in the rush to redefine their sites are myriad other smaller players, from Geocities, a sprawling online community that allows users to design and publish free home pages, to Zapata Corp., a Houston-based fish-oil firm that unsuccessfully bid $1.7 billion for Excite in May and now is merging 24 smaller sites it has recently acquired into one mega-site called Zap.com.

Last week, Network Associates Inc., which sells anti-virus software, announced with fanfare that it would create a portal for people who want to "manage the health and fitness of their PCs."

"Everyone wants to be a portal," said Netscape's Homer. "But they're not all going to be successful portals."

Who's Ahead?

Industry analysts say it's still too early to tell. But the usual suspects – Yahoo, AOL, Netscape, Microsoft and Excite – have established an early lead, according to market-share studies. Industry specialists point to three reasons that they've pulled away and could hold onto that advantage.

Personalization. All five portals allow users to alter the portal's front page to fit their tastes, from picking local weather reports to setting up an individual stock portfolio. (The portal knows who you are because it places an identifying token called a "cookie" on your computer.) If users have their own page – and they've gone to the trouble to create one – the portals hope it will lead to frequent return visits.

For the portal, the expense of offering personalized sites – which require users to fill out an online questionnaire – are more than offset by the premium they can collect from advertisers by showing users targeted ads based on their survey responses. Even if visitors don't want to personalize their pages, sites are still looking for other ways to get users to fork over personal information, often by mandating registration to get an e-mail account or enter chat rooms.

"We're capturing a pretty rich profile," said Laura Jennings, the Microsoft vice president in charge of the company's portal efforts. "That's the most crucial asset we're building."

Tethered browsing. Upcoming versions of Netscape's Navigator browser will feature a "tool bar" extending down the left side of the user's computer screen that will maintain a constant link to the company's portal, Homer said. It will provide a list of suggested Web pages to visit and the ability to search for other sites, and it will display a small advertisement. Although industry analysts expect Microsoft to unveil similar technology in Version 5.0 of Internet Explorer, Jennings said the company is "not currently contemplating doing that." AOL also has a similar advantage: When members venture onto the Web, they're always greeted first by the AOL.com site.

Original content. The five sites realize that basic wire-service dispatches, sports scores and stock quotes aren't enough to set them apart. They're furiously striking exclusive deals with original "content" providers, from local newspapers to stock brokerages and travel-information services, making a bet that many users will be discerning enough to favor sites with the most thorough material.

Microsoft enjoys an advantage here: It has developed its own travel, car-buying, personal-finance and news sites. Disney also has access to exclusive material, from ABC News, ESPN and Disney itself. "The way to win isn't repackaging a lot of stuff that anyone can get their hands on," Excite's Bell said. "You want content nobody else has."

Danger Signs

Perhaps most significant, however, is an expected drop in portal sites' share of online advertising. Such sites currently take in 59 percent of advertising dollars on the Internet, according to Forrester. By 2002, the research firm predicts, that figure will drop to 30 percent.

Fueling that drop, analysts predict, will the growth of "advertising network" services such as DoubleClick that make it easier for businesses to place ads on a variety of smaller sites.

"There's a lot of fairy dust here," said James C. Balderston Jr., an analyst with Zona Research, a consulting firm in Redwood City, Calif. "Their [stock] valuations are are based on the expectation that, in two years, they're going to be the next television networks. It's excessive enthusiasm."

Portal executives, however, point out that even if their share of ad revenue drops to 30 percent, it will be of a much larger market, one that Forrester predicts will grow to $8 billion in 2002. "This can be a very attractive business," said Halsey Minor, Cnet's chief executive.

Skeptics also raise more fundamental questions about the portal concept: Will Web surfers want to hang out in one Web site for longer than a few minutes? Will they want to get their stock quotes and news blurbs and movie listings from department-store-like places, or would they rather visit individual boutiques? Will they balk at the stickiness of such sites, shunning them for other parts of the Web?

Consider David Henderson. The 53-year-old Annandale resident had been an AOL subscriber since 1991. Irritated that he "had to hack through a bunch of ads" when he logged on, he quit in July and obtained a direct connection to the Internet through AT&T Corp's WorldNet service.

When he's online now, he does all he can to avoid portals and instead seeks out search engines that direct him quickly to specific sites. The portals "are so much alike, they're a blur," said Henderson, a public relations executive. "They're dull because they've all tried to emulate each other."

Indeed, many portal sites share their content with one another. AOL, for example, is providing its "Digital City" local guides to Netscape for use in the "local channel" of its portal. Material from Yahoo and Excite's Web directories are available on Microsoft's site.

Although it might seem odd that a portal would share some of its most valuable content with a competitor, industry executives believe the money they get from those deals more than covers the revenue they're losing from people who won't visit their site.

"On TV, it's all about exclusivity. You can only see 'E.R.' on NBC. But we haven't seen that model emerge on the Internet yet," said Barry Schuler, the president of AOL's interactive services division. "Everyone is trying to get as many eyeballs on their content as possible."

Executives at portal firms acknowledge that some Web users will be turned off to what they're doing, but they contend that just as many – if not more – won't be. "We think that most people think that the Web has become too confusing," said Yahoo's Mallett. "We're providing organization – and there are a lot of people who want that."