Portals will have to change to
survive in a broadband world
LONDON - European portals such as Yahoo!, AOL, MSN and Terra Lycos face a tough time in the future unless they take a completely different approach when broadband internet access takes off, according to a report by Forrester Research.
Hellen Omwando, associate analyst at Forrester, believes that content owners will have less use for portals because their content will have access to other gateways, which will develop out of the emergence of broadband applications such as video-on-demand and personal video recorders.
The shift of power from portals to content producers and platform owners -- which will develop prime content for their sites -- will hurt the profits of these companies, largely because they do not own their own networks.
Forrester predicts that European consumers will be prepared to pay for certain types of broadband content. It estimates that adult content, streamed audio and video, and online gaming will generate total revenues of £3.1bn by 2005.
Adult content is forecast to take around 79% of this revenue this year, but that percentage will fall to around 17% in 2005 when streaming content takes off.
Meanwhile, portals will miss out on a large amount of this revenue because they avoid adult content for fear of alienating their target audience.
Omwando believes that to survive, Europe's portals must adapt to one of four business models that "blend narrowband with broadband use".
She predicts that Terra Lycos and AOL, which own successful portals and rich content, "will enrich their content by buying small but premium-content producers in local markets. Each service will be run as a separate business, raising the bar on quality entertainment, providing ad-free online media consumption and getting revenues from hybrid offerings."
Omwando adds, however, that Yahoo! could sell 50% of Yahoo! Europe to Vivendi Universal, which will use the portal's marketing expertise to become the top pan-European "value-chain owner". MSN, Wanadoo and T-Online, meanwhile, will use their background in technology, through their backers, to succeed as tools-based providers that offer peer-to-peer communication applications, seek expansion in SME markets and make money from service fees.
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