Portal Wars II: Mobile Operators Take on Yahoo
By Richard Baum
LONDON (Reuters) - If you thought the likes of America Online (NYSE:AOL - news) and Yahoo! (NasdaqNM:YHOO - news) had the Internet portal industry pretty much sewn up, then Europe's mobile phone companies would urge you to think again.
Armed with deep pockets and a direct line to millions of customers, operators such as Britain's Vodafone AirTouch (VOD.L) and Sonera (SRA1V.HE) of Finland are building portals in the belief that the battle for the gateways to the Internet has barely begun.
With wireless devices expected to overtake computers by 2003 as the most popular way of accessing the Internet, the mobile operators are convinced they can beat Yahoo! at its own game.
The networks will profit from call charges regardless of which portal their customers use, but owning the web sites that guide people to other services would add to their bounty significantly.
The money lies not so much in the traditional portal cash cow of advertising -- the industry is still thinking about how to make that work on a handset's small screen -- but through controlling e-commerce in a way that lets the operators share the revenue.
The idea that most excites the industry is that of people charging online shopping to their phone bill instead of a credit card. In return for providing a link to the retailer on its portal and collecting money from its customers, the operator would skim off a commission charge.
Reverse Cash-Machine
Pre-pay phones, where users buy vouchers for calltime, are ideal for such transactions, said Brian Greasley, who runs the Genie portal for Britain's number two operator BT Cellnet (BT.L).
"I think of pre-pay as a reverse cash machine," said Greasley. "It gives people the ability to load money into their phone -- you can buy minutes but you can also buy a CD."
As well as addressing people's worries about credit card security, it would open e-retailers' doors to people without plastic.
"Most teenagers don't have credit cards but they do have pre-pay mobile phones," Greasley said.
Japan's NTT DoCoMo (9437.T) is already doing something similar. Its i-mode mobile Internet service, which has close to seven million subscribers, takes a nine percent commission on subscriptions to content providers like newspapers and the Hello Kitty cartoon Web site.
At present commissions earn DoCoMo an additional 2,000 yen ($18.95) a month per subscriber, little more than loose change for the world's second largest mobile company. But the potential is enough to have its European peers scrambling to set up portals.
Vizzavi's Big Ambitions
Sonera has had its Zed portal running at home for almost two years and plans to roll it out in six other countries this year. Cellnet's Genie has signed up close to one million subscribers in Britain and is expanding into Asia.
But it is DoCoMo's larger rival Vodafone that has perhaps the greatest ambitions in the field. Its Vizzavi joint venture with French media group Vivendi (EAUG.PA) is spending 200 million euros ($187.3 million) creating a portal for the partners' 70 million mobile phone and pay TV subscribers.
Yahoo! is not worried by the new competition, confident that its global audience of 145 million people means it knows what Internet surfers demand from a portal.
"The challenge I see for the network operators is do they understand what the user wants?" said Fabiola Arredondo, Yahoo! Europe's managing director.
Yes emphatically, responded Chris Smith, the managing director in charge of Vodafone's Internet applications division. "We understand our customers much better than they do."
Vodafone knows, for example, who has subscribed to its text message services for cricket results and would be able to direct those people to cricket content on its portal, he said.
More importantly, it understands the potential of the wireless Internet and realizes that the kind of content people will want in the future could be very different from the news feeds and weather forecasts of the traditional portal.
Smith's vision of a customizable portal on a high-speed, permanently connected handset would allow him to include a window for a live game of draughts with his young son or a link to his wife's online agenda when she is away on business.
We Know Where You Are
The mobile operators will also have the advantage of localization technology that tells them where their customers are, Smith said, allowing their portals to direct people to nearby restaurants and businesses.
Despite all this, Vodafone will have its work cut out wooing people from the traditional portals, said John Jensen, wireless services analyst at Chase H&Q.
In countries like Britain where Internet penetration is high, people have already personalized a Yahoo! or Excite (NasdaqNM:ATHM - news) front page and will want to use the same portal on their mobiles, he said.
Some analysts think the operators would be better off co-operating with the existing portals than trying to compete.
"AOL is a great content aggregator but it knows zilch about mobile. The mobile operators know a lot about their customers but nothing about portals,'' said Eden Zoller, a senior new media consultant at independent research company Ovum.
Four European operators including the giant Telecom Italia Mobile (TIM.MI) have reached the same conclusion, striking deals under which Yahoo! will provide their portal.
Zoller reckons the ability to personalize and localize content will determine which portals survive.
"The established Internet portals like Yahoo and AOL will certainly give the operators a run for their money," she said.
Greasley believes Genie is already outrunning them, its early launch giving it a first-mover advantage over both the traditional portals and Vizzavi. And he thinks whatever lead the established players have on the fixed Internet will count for little in the wireless world.
"The land-grab for the mobile Internet is yet to be made."
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