|
|
 |
 |
 |
 |
   |
COMMENTARY: THE BIG MEDIA ARE SLOW, BUT HARDLY OUT OF THE RACE
It may be true that some large media companies failed to foresee the power of the portals. Indeed, the recent flurry of high-profile deals, such as Walt Disney Co.'s purchase of 43% of Infoseek and NBC's deal for a 19% stake in Cnet's Snap!, have a whiff of desperation about them. Many observers expect other media giants to cough up millions to buy stakes in portals they could have had cheap a year ago. Steve O'Leary, managing director of Broadview International, a Boston-based information technology investment banking firm, expects News Corp. and possibly Time Warner or CBS to take stakes in portals. "If you've got multiple media and entertainment franchises, it sort of leaves a gaping hole if you don't have a mass-market Web capability," he says. The portal sites themselves have helped foster this image of media players as plodders. "The real surprise is that it has taken them so long to recognize that this new medium is happening at a staggeringly rapid pace," Stephen M. Case, America Online's chairman and chief executive, said of big media companies recently. "Major media companies need me a lot more than I need them today," boasts Lycos Chief Executive Bob Davis, pointing to his company's 19.5 million monthly individual users. Asked if he thinks Lycos might do a deal with a media company, he says: "We're probably not going to acquire one of the Big Media companies." Well, one hardly expects Internet pioneers to act like wallflowers. But to discount the strength of the media giants at this stage would be a mistake. Rather than just now waking up to the Web, they have in truth been participating online and benefiting for years from the Net's rising popularity. CAUGHT SHORT. Tribune Co., for instance, made some early and profitable investments in portals. In 1991, it invested $6 million in America Online. That stake's worth has grown to nearly $500 million, including $151 million in gains from selling shares over the past few years, says David Hiller, a senior vice-president at the Chicago-based media company, which publishes four major daily newspapers, including the Chicago Tribune, as well as operating radio and TV stations and doing online programming. Tribune Co.'s investment in Excite -- which totaled $7 million in 1996 -- has grown to $70 million, he says. "But in fact, the most valuable part [of the initial AOL deal] has been as a business partner for us to create local products within the AOL service," Hiller says, referring to the company's role in forming Digital Cities. Ultimately, he thinks Tribune Co.'s "local" portal sites will pay off even more than its investments. (Business Week inked its first deal with America Online in 1994, creating Business Week Online.) Media giants may have been caught short by the portals' ability to start generating profits while the sites of publishers are still bleeding red ink. But analysts believe the phase during which the portals dominate the Web may be temporary. Even if the business of providing content for Web sites is not the way to make money now, media companies believe that eventually it will be. As a consequence, rather than trying to be all things to all people, as the portals do, media companies are building comprehensive sites around specific niches and then partnering with portals to promote them. One example is Hearst Corp.'s HomeArts Network, a lifestyle site for women containing content from titles like Cosmopolitan and Good Housekeeping, which has a deal to distribute co-branded content on Excite's Lifestyle channel. DESIGNER PORTALS. Some industry analysts believe that "affinity portals" will be the next big thing on the Net. Like their larger brethren, these will aggregate content, tools, and shopping from different sources. But such sites will be organized around high-quality branded content geared toward a specific audience. "People with specific interests will change to a site that better suits them," predicts Bill Benedict, president of Alpine Meridian, an interactive technology consulting firm in Greenwich, Conn. As online customers select their own home pages (instead of using default browser settings), rely more on bookmarks, and personalize sites to suit their tastes, traffic to Big Media sites will increase, analysts believe. "Media companies are in the best position to benefit from the rise in prominence of affinity portals," wrote Mark Mooradian, a principal analyst with Jupiter Communications Inc., in a March report. For them to benefit, however, they'll have to cut deals with portals. They won't have to buy one, but they'll need to work with one -- or several -- in order to acquire a mass audience. The numerous ways media companies can use portals to direct traffic back to their sites include providing branded content, buying banner ads, and even purchasing "keywords," so that when a surfer searches on a related word, their ad banner pops up. "They can and should do all of them," says Barry Ogdon, a Stamford (Conn.) consultant to media companies on magazine circulation issues. "Once the site has the traffic, they can either make it or break it from there." It is a mistake, moreover, to assume that portals don't need Big Media's help. Portals gain credibility from featuring established brands. They also need the cross-promotion media companies can offer on television, print, and radio, says Mooradian. "Going forward, that's what a lot of these guys [the portals] are going to need to survive," he argues. Will Tribune Co. buy a bigger stake in a portal? "We don't need to," Hiller says. "They are also darn pricey. Our present path of building our own local portals and partnering with the national portals to drive traffic is pretty sound. "Portals have gotten where they are because of their ability to leverage off of other people's investments in content creation and infrastructure," he adds. Now it's Big Media's turn to leverage off the success of portals -- and to make its brands a staple of the Internet.
By Amey Stone, associate editor, Business Week Online RELATED ITEMS
|
The current take on Big Media and the Web is that established publishers have largely missed the boat. While they were trying to attract an audience to sites they built around their familiar brands, goes the conventional wisdom, much nimbler portal sites such as AOL, Yahoo!, Excite, and Infoseek passed them by, reaping the lion's share of traffic and advertising dollars.
Updated Aug. 27, 1998 by bwwebmaster
Copyright 1998, by The McGraw-Hill Companies Inc. All rights reserved.
Terms of Use