>>There is one potential win-win solution for Yahoo! and Excite. Both could acquire lucrative niche or category-specific online retailers that do not compete with their e-commerce partners in multiple product categories - much as Alta Vista and theglobe.com now do.
Given this guideline, which potential e-commerce partners would be good fits for Yahoo! or Excite? Online auctioneers like an ONSALE, Bid.com, uBid or even Priceline would make nice matches. Through such acquisitions, these portals could close the content/e-commerce loop - in their auction spaces - yet remain able to cut high-priced virtual real estate deals with other e-tailers.<<
THE RAGING BULL'S CYBERSTOCK INVESTOR REPORT
"Your Weekly Internet Stock Newsletter"
February 7, 1999
"Now Read By Over 50,000 CyberInvestors Weekly"
Editor: Matthew W. Ragas
ragingbull.com
Magic words: community information (i.e. content) + transaction (i.e.
e-commerce)
Combining content with e-commerce is nothing new for the portal and online
community players. What is new is that in these four deals, AOL Digital City,
theglobe.com and Alta Vista seek to close the e-commerce loop. It's nice for
Yahoo! or Excite to get a small slice of the transactional pie, but it's a lot
more satisfying to convert hard-won eyeballs into full transactional revenue.
Will Other Portals Follow Alta Vista's Lead?
Alta Vista and theglobe.com have clearly taken the first major steps toward
creating their own wholly owned e-commerce sites. A direct content/e-commerce
combo could be a grand slam for both - despite the insecurity of heading into
uncharted territory.
Here's where it gets tricky. To date, portals and online communities have
relied largely on advertising and sponsorship agreements to generate revenue.
Portals have traditionally racked up the bucks by parceling off categories of
their exclusive virtual real estate to specific online merchants, for a set
period of time. Now, through owning their own e-commerce sites, Alta Vista and
theglobe.com find themselves in the delicate position of competing for sales
with many of their advertisers and e-commerce partners.
For Alta Vista and theglobe.com, this won't be too much of an issue. Neither
has been able to forge the multi-million dollar virtual real estate deals that
Excite and Yahoo! regularly sign with merchants. The number of advertisers or
e-commerce partners Alta Vista or theglobe.com may lose while developing their
e-commerce sites should be minimal. In the wacky world of online advertising,
advertisers will likely continue to buy ad space on sites like theglobe.com and
Alta Vista - even when in direct competition with such portals' e-commerce
sites.
Lycos, Excite, and Yahoo! will fail to enjoy this luxury. They already
prominently feature e-commerce merchants as strategic partners; they have
already raked in millions in exchange for prime placement on their sites.
Yahoo! and Excite would lose millions if they cannibalized their juicy virtual
real estate businesses by acquiring their own e-commerce merchant.
But can they afford not to?
E-tailers like Amazon.com and online brokerage sites like E*TRADE are working
to become destination sites. According to research firm Media Metrix, eBay and
Amazon.com came in at 20th and 14th place, respectively, in the race to be the
most popular Web property this past December.
Does this mean that 2 years from now top-tier portals will find themselves
almost entirely cut out of the lucrative virtual real estate game? Will
Amazon.com really need to shell out millions to have portals funnel traffic to
its site? Doubt it. Though Amazon's Jeff Bezos may still be forced to play ball
with the portals, his bargaining power will be greatly enhanced.
In reality, all of the portals run the risk of waking up to find that they have
created their own worst enemies. Sites like Amazon.com (which has, for
instance, added its own community features through the acquisition of
PlanetAll) may no longer be willing to pay such steep dollars to renew their
contracts with the portals.
If this is to be the case, it makes more sense for Yahoo! and Excite to acquire
leading e-commerce merchants now - while both have very attractive currency
(stock) to offer an acquirer - than it does for them to wait. In a year or
two's time, they may well find their bargaining power significantly weakened.
That's right; it's a "damned if you do, damned if you don't" scenario. Alta
Vista and theglobe.com have decided it makes sense to own the whole
content/e-commerce enchilada. Are they right?
Time will tell. Meanwhile, the clock is ticking for Microsoft, Yahoo!, Excite,
Lycos and Infoseek....
A Solution For the Top-Tier Portals
There is one potential win-win solution for Yahoo! and Excite. Both could
acquire lucrative niche or category-specific online retailers that do not
compete with their e-commerce partners in multiple product categories - much as
Alta Vista and theglobe.com now do.
Given this guideline, which potential e-commerce partners would be good fits
for Yahoo! or Excite? Online auctioneers like an ONSALE, Bid.com, uBid or even
Priceline would make nice matches. Through such acquisitions, these portals
could close the content/e-commerce loop - in their auction spaces - yet remain
able to cut high-priced virtual real estate deals with other e-tailers.
Chances are, Yahoo! Chief Tim Koogle and Excite CEO George Bell are already
exploring these opportunities. With Lycos apparently working to link up with
NBC and Mel Karmizan at CBS looking to spin off his Web holdings into a
separate public company, I'd say these two have their hands full.
Meanwhile, rest assured that Time Warner, Viacom and Murdoch's News Corp. won't
sit on the sidelines forever.
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