Web portals use mass
marketing to build identity
BY MONUA JANAH
Mercury News Staff Writer
Remember when the Web used to be cool? The haunt of
Gen-Xers, geeks and technophiles? That's so over.
The future of the Web is now in the hands of the people who
sold you Wheaties, Crest, Tide and Planter's Peanuts.
In Silicon Valley's hot ''portal'' companies, which operate the
Web's most popular destinations, the buzz is all about
branding -- trying to make their company names household words. The goal is attracting the
masses to their Web site -- and keeping them there. To do this, marketing talent is being
imported from packaged-goods companies, where mass merchandising became an art
form.
Yahoo Inc. and America Online Inc. are way ahead of the branding game, some analysts
say. But the fight for advertising dollars and consumer purchases is just beginning. For most
of these companies, the starting-up phase is over. Survival is the next struggle. And it will be
difficult.
While online advertising and consumer purchases on the Web will rise significantly from
current levels, the pie won't be big enough to feed more than two or three big portal
companies, analysts say. Today, the bulk of advertising space on the Web is going unsold
because advertisers aren't convinced the ads will draw enough eyeballs.
Yahoo got the branding part right early on, focusing on making Web technology accessible
to everyone. Its message was simple and consistent: projecting the company's site as the
place anyone would go to search for anything or anyone on the Web.
''The way we market our product has always appealed to a broad audience,'' says Grant
Winfrey, senior brand manager at the Santa Clara-based company. ''The end result is an
emotional response or affinity. People trust the Yahoo brand.'' Winfrey came to Yahoo after
several years at Nestle and Procter & Gamble.
America Online, too, was a leader in successfully packaging its service as a safe,
consumer-friendly doorway into the mysteries of cyberspace -- winning the company more
than 16 million users. Now, the other top Web portals are repackaging, adding services and
advertising. ''The Net is an anonymous medium,'' says Harry Motro, chief executive officer
of Infoseek Corp., based in Sunnyvale. ''People aren't sure who and what they are dealing
with. Trust and confidence is a huge element of what's missing. What we are building is
brand.''
Infoseek's alliance
Counting on Disney name recognition
Infoseek, which has allied with Walt Disney Co., recently rebranded its network of Web sites
the Go Network, which it is pushing as a distinct brand. Two of Infoseek's marketing
executives, Jim Morouse and Felicia Chan, spent several years at Procter & Gamble.
Infoseek is also hoping that the Disney name will help to inspire viewer and advertiser
confidence. ''Disney is very conscious of orchestrating and building brand power,'' Motro
says.
Meanwhile, Microsoft, which operates the second-largest set of Web properties, in February
began a major marketing and advertising campaign aimed at making its Microsoft Network
more consumer-friendly. Currently, a significant chunk of MSN's traffic comes from
business and technical people visiting the Microsoft corporate Web site. For the future, the
company wants to make sure it is positioning MSN as a place for general consumers, too.
Other portal companies are merging with much larger entities, with deeper pockets, to
market themselves more effectively to a broader audience. Excite Inc. will soon become part
of @Home Network, and Lycos Corp. is in a troubled deal to combine with part of USA
Networks Inc.
Online advertising is still a tiny fraction of overall advertising dollars. Most advertising space
on the Web goes unsold because the owners of the sites haven't been able to convince
potential advertisers that enough people will see their ads. Yet the Web is a medium that
could potentially be a gold mine for advertisers, because the viewer of the ad can instantly
become the buyer of the product or service with a few clicks of the mouse.
The Web also allows almost infinite customizing of content or of an advertising message.
''The Web is the best direct-response vehicle known to man,'' says Joe Kraus, senior vice
president and co-founder of Excite. ''For instant feedback, there's no better environment
than the Web.''
It is this potential that is luring consumer-goods marketing veterans to this new frontier.
Elizabeth Macken is the newly hired director of strategy and analysis at US Web/CKS's
so-called ''audience development'' practice. She comes to the Santa Clara-based Internet
commerce and marketing communications firm after 10 years in consumer-goods
marketing, most recently at Nabisco.
''The dream of every marketer is to treat each customer as if he or she is the only or most
important customer the company has, basically, one-to-one marketing,'' Macken says. ''In
the offline space, it's just been too expensive in both time and money for most companies to
afford. The Internet is taking many of the time and cost factors out of the equation, making
one-to-one marketing a reality for thousands more industries.''
Macken's background has given her a set of skills -- knowing how to connect with a mass
audience -- now largely in demand for purely Web-based companies such as the portals as
well as for traditional companies seeking to build online businesses. ''I began my career in
packaged goods,'' she said. ''Marketing skills learned in that environment can be translated
to virtually any other industry. Literally, I've sold everything from soup to nuts and I feel it's
more about how you sell than what you sell. If you can sell something as mundane as
breakfast cereal, you can sell almost anything.'' These marketing skills are what Macken
hopes will help US Web/CKS's clients build profitable online businesses.
Macken is also representative of a broader trend. As more companies strive to make the
Web part of the business mainstream, technology becomes much less of a focus. While
software companies have paid lip service to this goal for years, it took the Web, and the
dynamics of chasing very few advertising and e-commerce dollars, to make it an urgent
objective.
Part of Macken's job is to make sure that the programmers and the ''creative'' types at
US Web/CKS keep the consumer constantly in mind when designing sites for their clients.
''The goal of selling on the Internet shouldn't be to make the consumers tech savvy. The
goal should be to make technology so sophisticated it appears simple.''
The major consumer Web portals have been trying to do this, but more work needs to be
done. The technology must be invisible, said Mike West, an analyst at Gartner Group Inc.
''That is what will make the Internet more of a mass market. If you're conscious of TV
technology, you've got a problem with your TV set. Today, most of us are conscious of
Internet technology because we've often got some kind of a problem with it.''
Who will win this branding game? Just two or three consumer portals will survive, analysts
say. That's because, despite the hype, the potential market isn't very large.
''If you look at the top nine portals, they're capturing about 60 percent of advertising revenue
on the Web, which Forrester estimates was $1.3 billion in North America last year,'' says
Jim Nail, a senior analyst at Forrester Research Inc. ''That's a pretty small business
compared to the overall world of North American advertising, which is more like $200 billion.''
As for e-commerce, Forrester predicts that North American consumer transactions on the
Web will be up around $16 billion by 2003. Usually, the portal company will make a deal with
a seller -- which is likely to be an advertiser as well -- to take a small percentage of the
transaction. Even if the top few sites capture the lion's share of the consumer e-commerce
dollars, there aren't many to go around.
''Advertising on the Web is doubling every year, and Internet sales are more than doubling,''
says Bill Bass, another Forrester analyst. ''But the problem is, you're still talking about
peanuts. Two peanuts are twice as good as one peanut, but still not a great meal.''
Forrester estimates that the top nine sites accounted for 16 percent of all Internet page
views last year, unchanged since late 1996. ''As a sector, traffic is not consolidating around
the portals,'' Bass says. ''But within that category, there's been a big share shift -- AOL and
Yahoo pulled out in front. They now have over half the page views in that category.''
Gartner's West says AOL and Yahoo will be the likely survivors. ''They have the game sewn
up,'' he says. ''It's completely about branding, and they're the ones that have built
successful brands around a certain set of associations.''
One factor that could change the competitive picture is the spread of fast Internet access,
via cable modem or digital subscriber line technology. So far, both AOL and MSN have
successfully positioned themselves as access providers as well as portals, while the
Excite-@Home combination seems headed the same way.
But Gartner estimates that through 2004, 60 percent of all U.S. Net traffic will be through
analog modems. Another 35 percent will have high-speed access, while the remaining 5
percent will be using cellular modems and other technology.
''We still won't have a high-speed network generally available,'' says West. ''If that 35
percent is a big enough market, though, maybe there'll be another set of competitive issues
within that segment. Maybe if you have a really good set of services, that will be enough to
make you highly profitable.'' But that's a not very likely scenario, he believes.
Assuming that the branding strategy pays off for the surviving companies, does that mean
they will make most of their money through advertising, or through e-commerce? Nobody
appears to know for sure.
An apt comparison
Web not unlike early days of radio
Yahoo co-founder Jerry Yang says that as more traditional industries set up Web
businesses, ''each wave brings additional revenue opportunities for us, because it validates
the medium. But is it all about buying and selling? Probably not.''
His company, he says, has managed to be profitable because it behaves mostly like a
media company. ''Most of our revenue is from marketing,'' he says. ''But we are going
forward on e-commerce. Our revenue stream is diversifying.''
Ward Hanson, director of the Internet marketing project at Stanford University, compares the
state of the Web today to the early days of radio. ''The original 'www' was World Wide
Wireless,'' Hanson says. ''There was the same rapid growth of an industry, with
applications that hadn't been envisioned initially. There was the rapid growth of investment,
and the popular fascination, which then feeds on itself and leads to more spending by
everyone.''
Also, he notes, there was a similar struggle with a business model for the new medium.
Advertising wasn't allowed until 1926. Subsequently, ''half the countries in the world went to
a public broadcasting systems, and half went to the American system, which was local and
national advertising based on a network. The invention of the network -- NBC -- solved the
question of the business model.''
No such solution is yet in sight for the Web. But only one thing is clear -- for now: Building
market share with a strong brand is more important than almost anything else.
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