Back in the world of actual stock talk, what do you folks make of this little piece of analysis? (Hope no one else posted this already!)
Luck to all,
David Stern
Portal Math
Summary: Portals may be hot, but market leader Yahoo! sells only 14% of its inventory at an average CPM of $4.36.
Birds do it. Bees do it. Even guys making fish meal do it. Everyone, from ABC to Zapata, is falling in love with the portal concept. Maybe they're attracted by the prediction that portals will grab 67% of North America's ad dollars this year, some $870 million, for only 15% of Web traffic.
Or could it be they're eyeing 2003 when portals will draw 20% of traffic and 30% of ad dollars, equal to $3.2 billion, according to Forrester Research? That's a not-too-shabby $460 million for each of the seven sisters.
But a closer look reveals that portal fundamentals are not as rosy as some people might have you believe:
· Sell-through rate - A July analysis by BT Alex. Brown says Excite sold 16% of its total inventory. Things are worse at Yahoo!, which managed to sell only 14%. This means Yahoo! sold, on average, 16 million pageviews of the 115 million pageviews it served daily in June.
· Effective CPM - While Yahoo! claims its CPM is "solid in the mid-twenties," J.P. Morgan arrived at an effective CPM of $4.36 for Yahoo! [effective CPM is total ad revenue divided by number of pageviews]. Here's how the leading search engines, plus DoubleClick and 24/7 Media stack up:
· Effective CPM Comparison for Q298 --
Network/Portal Effective CPM*
InfoSeek $8.06
Lycos 7.12
Excite 6.69
Yahoo! 4.36
DoubleClick 3.72
24/7 Media 3.17
Source: Sep. 1998 J.P. Morgan *See text
· Visit length - Despite all the noise about turning portals into destination sites, RelevantKnowledge reports Yahoo! visitors averaged 88 pageviews in August, while spending 127 minutes at the portal, or 86 seconds per pageview. The upshot: Search engines continue to be the Internet's doormat.
A recent survey by Alexa Systems suggests Web traffic is no longer as concentrated as it used to be. About 50% of Web traffic goes to 900 sites, which gives aggressive new portals a fighting chance to replicate Yahoo!'s success.
To prevent that from happening, Yahoo! has launched a major TV campaign and fortified itself with 130-150 sales people, the Net's biggest sales staff, according to BT Alex. Brown.
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