The portal: One year later

It`s been about a year since we first started hearing the word "portal" in an Internet context. Before that, it merely meant an elaborate door or gate. Subtly, the Internet is still debating the exact meaning today: what exactly the word "portal" means in Internet terms still somewhat hovers between a content site with commercial intent and a concentrator or aggregator of Web information. In real terms, the meaning is probably somewhere between those two extremes.

Content companies, it seems, haven`t really made any money after all, at least not on our shores.

Money-less community

Search engines and indices such as Yahoo! and Excite (just acquired yesterday by @Home for $6.7 billion) are now commonly billed as portals, while content hubs aimed at specific interest groups are springing up all over the place and are sold as portals.

The word is starting to gain in popular acceptance and understanding, but it is unclear whether it will ever take the place of "site" when Netizens talk. Truth is, it`s really a technical "industry" term, and I find it doubtful whether London company Pangorights will be able to get significant return from having registered the domain "sportal.com". The general Internet user, it seems to me, might just miss the reference; though I cannot blame them for trying - it is relatively cute. Much will depend, of course, on what the site will actually feature once it`s up.

One year after the coining of the phrase, portals suffer from much the same set of frustrations that Internet content businesses have grappled with for the past year and indeed before that. The content business, worldwide, remains a capital-intensive exercise because revenue models aren`t as well defined as they are in print publishing. As many will know, even paper publishing is a cutthroat business and not necessarily an infinite money-spinner: just witness the pitiful salaries paid to writers and editors. On the Internet, since ROI is less evident and harder to track, publishing information and peppering your offering with advertising remains an unorthodox business proposition, for now.

There are many reasons for this, and I think we`d do good to summarise some of them here.

(1) Push vs pull. The sterling opportunity presented by the Web to exactly target information and advertising to certain users based on behaviour tracking is treacherous because of the user`s ability not to go somewhere. Putting it another way, unlike in a magazine, where I can`t really escape looking at the adverts (all I can choose to do is not act on them), it`s quite feasible to ignore banner adverts on the Net. Sure, I might see them, but the real success of Internet advertising is still measured in the concrete return of a click-through, and in my experience, few people actually follow advertising links. If banner adverts are charged by actual click-through (as they well should) then Webvertising isn`t a good proposition for making lots of money.

(2) Publishing content costs money. Portal companies are realising that publishing on the Internet, and publishing well (ie good quality, original information and opinion) costs just as much money as publishing it on paper. A few years back, we all assumed the Internet would constitute the next Gutenberg revolution, with cheaper access to publishing due to the reduced need for professionals to oversee the process while the general public, it was hoped, would make use of ubiquitous, cheap access to read it all. Neither prediction has come true. A new class of Web professional has appeared, a group of people who oversee anything from writing to graphics to publishing and maintaining the infrastructure, and, truth be told, they`re no cheaper than those who edited for print, or those who printed. And Internet access hasn`t become ubiquitous or free: in SA, one speculates that there are currently about 1.5 million Internet users, and we`re a country of more than 40 million people.

(3) Completism and convergence are changing. The wild gold rush of past years seems to be ebbing off a little right now. Previously, every paper publishing company was ready to dump money into content enterprises in the hope of riding the cusp of the new wave of technology and information convergence. The US stock markets spurned this model of investment, borne out by the unrealistically high returns on investment in an environment where everything "Internet" or "multimedia" could gain hugely through sheer investor ignorance. Locally, investors have always been a little more cautious, and that trend will continue. Content companies, it seems, haven`t really made any money after all, at least not on our shores.

(4) There`s no proof (yet) that portals can actually make money. Portal companies have started to recognise the investor`s need to make money. The new breed of portals revolves around something called "transactive media"; this translates to "publishing with the express intent to sell something". The Web is seen as the ideal environment to tell and sell, at the same time. Personally, I predict this will result in another transitory phase in 1999: let`s call it the "Age of the Online Catalogue". Mail order catalogues, while not exactly anyone`s idea of good reading matter, fill a particular niche in the publishing world. That niche is completely utilitarian: mail order catalogues are published by companies whose main business is having something to sell, so any writing in them is meant to bring about a purchase decision. The difference between what our culture values as good content and a mail order catalogue lies in editorial independence and opinion. Newspapers have traditionally drawn the line at letting opinions be controlled by advertiser interest. Online, though, in the age of portals scrambling to make money and survive, we`re already being subjected to "click here to buy" buttons all over the place. It`s only going to get worse.

The value (for the purchaser) of buying a print publication lies in its independent opinion. Advertisers recognise that magazines and newspapers are primary bought for that reason and don`t try to own the publication. In the Web portal environment, the publishing model isn`t quite that well developed yet, and the content presented, consequently, is less trustworthy. Every day new publishing models are tried out and experimented with; overall, this leads to the user being more confused, not less.

A publication isn`t a shop. That should be a basic premise, even on the Web. If it`s opinion or information you`re good at, then that`s what you should be selling. I think that many investors are confused by this duality, even if they can`t formulate it exactly. Investing in an information age company is a leap of faith with the expectation of high returns. But while the Internet itself can`t be all things to all people, portal companies, too, shouldn`t attempt to be good at everything. I see content providers struggle with that problem every day: building the mechanism to publish and sell goods is easy. But things break down when it comes to the fulfillment stage: who delivers? At what price? Who carries the risk? Who insures the stock? And most portals are finding that they can`t compete with traditional retail: too expensive, too risky... If I were a supplier, I would also ask, "Why should people buy from you?"

We will go through a transitory phase this year while SA portals struggle to understand their position in the marketplace. We will go through the "Age of the Online Catalogue". It`s exciting, for sure, because much like everywhere else in the world we`re dealing with a new world, new fundamentals. So the ride itself will be interesting. I`m just wondering whether the inherent problems won`t become visible in South Africa`s comparatively small market much faster than elsewhere. Good luck to all those involved.