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A Study on the Web Portal Industry View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by KDI School Archives A STUDY ON THE WEB PORTAL INDUSTRY: By Chan-Soo Park THESIS Submitted to School of Public Policy and Management, KDI In partial fulfillment of the requirements for the degree of MASTER OF STRATEGY & GLOBAL MANAGEMENT Department of Strategy & International Management 2000 A STUDY ON THE WEB PORTAL INDUSTRY: By Chan-Soo Park THESIS Submitted to School of Public Policy and Management, KDI In partial fulfillment of the requirements for the degree of MASTER OF STRATEGY & GLOBAL MANAGEMENT Department of Strategy & International Management 2000 Professor Seung-Joo Lee 1 ABSTRACT A STUDY ON THE WEB PORTAL INDUSTRY By Chan –Soo Park A portal is a site on the Internet that provides a one-stop experience for Internet users, allowing them to check e-mail, search the Web, and get personalized news and stock quotes. Since 1998, the “portal” has been considered the most successful Internet business model. Portal sites have characteristics such as community facilitated by services, revenue that relies on advertising, a highly competitive market, heavy traffic, and an uncertain business. The world wide portal industry is like a battle zone for America’s top three, broad-based and vertical portals. The Web portal industry is dominated by the “top three portals,” which are AOL, Yahoo and MSN, and “vertical portals” such as Go Network and NBC. The broad-based portals --Lycos, Excite@home, AltaVista and Infoseek—do not lag far behind as major competitors. Many challenges face the three key players and broad-based portals. Their business models have risks of aggressive expansion (M&A), highly competitive markets, fluctuation of revenues, rapid technological developments, and limited operation history. To keep generating profit on the Internet, companies have to continue to develop and extend the portal brand, acquire competitive services or products and adapt quickly to these changes. I suggest that the successful portal sites should have the following key elements in order to effectively compete in the portal industry; building customer loyalty in the form of community, developing various services based on customer satisfaction, integrating services and e-commerce, obtaining enough subscribers, and localizing their content. 2 Copyright by Chan-Soo Park 2000 3 Acknowledgements I would like to acknowledge the help of several people who assisted me with my thesis. With their help, the overall quality of the thesis was greatly enhanced. First of all, I would like to thank my academic advisor, Prof. Seung- Joo Lee who gave me the opportunity to study at the School of Public Policy and Global Management, KDI. He has offered very productive advice on my studies throughout my academic career here for the past two and half years. I would also like to express my appreciation to my respected professor, Dean Gill-Chin Lim, for his constant encouragement during my 6-month study of e-business at Michigan State University in 2000, and for his support in the construction of the Web site One Million Jobs (www.omj.co.kr) last year. The KDI school has provided me with a clearer understanding regarding the “promise” of e-commerce. I have learned that the area of e-commerce is one in which the future holds great opportunity and prosperity. This was especially emphasized when I gave lectures about information technology to foreign students and elementary school teachers at the KDI school, and when I gave lectures about the Internet at Sogang University. Additional thanks to Dr. Steve Edwards of Dept. of Advertising, Dr. Bradley Shaw of Dept. of Marketing and Supply Chain Management and Director Michael Miller of Visiting International Professional Program at Michigan State University for providing productive advice on the research I conducted during my visit. I also would like to express my sincere appreciation to Mr. Sang-Woo Kim, CEO of the Internet Consulting Group for supporting me during my research time at MSU. Lastly, I thank my father, mother, brother and cousin, Nancy Park, for the patience and support. 4 TABLE OF CONTENTS I. Introduction 1. Background and objective of the research 6 2. Organization of the research 7 3. Basic concepts of the Web portal industry 8 II. Overview of the Portal Industry 1. U.S 15 2. Europe 17 3. Asia 19 4. Korea 21 III. Strategy and Performance of Key Players 1. AOL 25 2. YAHOO! 28 3. MSN 32 4. NBC Internet 35 IV. Strategic Options and Key Success Factors of Portals 1. Industry scenarios 38 2. Key Issues and Strategic options 40 3. Key success factors of Portal business model 45 V. Conclusion 1. Summary of key findings 50 2. Managerial implications 52 3. Future research agenda 53 5 I. Introduction 1. Background and Objective of the Research 1.1 Background of the research The word “portal” has become as much a part of the Internet’s vocabulary as the word “Web.” One of the big issues from 1994 to 1997 was the “Browser War” between Netscape and Microsoft. However, after 1998, companies began to take interest in how to develop the “Portal” to cause more visitors to spend more time at the site. According to Media Metrix, a media research company that provides monthly traffic rates (the number of visitors who access Web sites) for Web sites, 1 portals dominate the highest ranking sites in the top 10 sites. Since traffic rate is the most important criteria to measure a successful Internet model, a “portal” must be the most successful Internet model. But the portal business model has not been defined clearly so far. Portals contain a wide variety of content in the form of news, information, links and many services, such as ordering flowers, books, and CDs or free e-mail and Web space. As locating desired material on the Internet continues to become more difficult, the value of fast, reliable and simple-to-use portals increases as well. The portals business is a highly competitive industry. The market for Internet products and services is also highly competitive. There are no substantial barriers for entry into these markets. As a result, competition will continue to intensify in the portal industry. 1.2 Objective of the Study The objective of this study is to define the successful portal business model and 1 Media Metrix, February 2000 6 suggest the future challenges and strategic options of key portal. Additionally, this research will suggest five key success factors for future portal businesses. Most Web companies promote their sites as Web portals to attract and keep a large audience. But the concept of the portal business model is unclear. This research will define the portal business model and suggest key factors that will contribute to the success of the portal industry in the future. Currently, the portal industry is like a desert shrouded in smoke from artillery fire. The leaders in the portal industry are AOL, Yahoo and MSN. The second group of portal industries are broad based-portals--including Lycos,Excite@home, AltaVista and Infoseek --and vertical portals. These sites are in hot pursuit of Yahoo, AOL and MSN. This research will describe the key success factors and future challenges of the top three and other major players in the portal industry. Additionally, this study suggests strategic options for both implementing business strategies based on heavy traffic rates as opportunity factors, as well as for satisfying erratic users’ wants and needs. 2. Organization of the Research This research is organized into the following four parts. Introduction and basic concepts of the Web portal industry In basic concepts of the Web portal industry, this research defines the “portal” and “vertical” business model. Overview of the portal industry The overview of the Web portal industry consists of U.S, Europe and Asian industries, including Korea. This research scrutinizes industry overview, market size and key players in the U.S, Europe and Asia. Strategy and performance of key players This research describes strategies and performance of key players who are dominating the portal industry. 7 Portal strategic options and key success factors Key issues and strategic options are divided into the following parts: -. Industry scenario -. Key issues and strategic options -. Key success factors of the portal business model The industry scenario will be focused on future challenges in the portal business. The concluding chapter consists of the following parts. -. Summary of key findings -. Managerial implications -. Future research agenda 3. Basic Concepts of the Portal Industry 3.1 Definition of the portal 3.1.1 Concept of the “portal” “Portal” is a new term, generally synonymous with “gateway”, for a World Wide Web site that is or proposes to be a major starting site for users when once they are connected to the Internet. Additionally, “portal” refers to a site that users tend to visit as an anchor site.2 Portal models are in actually nothing new to the Web. These entry sites have been in existence for quite some time. AOL and CompuServe in the United States, T-Online in Germany, and Ireland Online in Ireland, for example, have offered first generation portals for years. Second generation portals are search engines such as Yahoo Excite and Infoseek that have begun to offer services in addition to being a directory or search engine. Most Web portals were initially created as search engines. Search engines are computer programs that allow users to type in a keyword and then direct them 2 whatis.com. Terminology definition. [online].Available:http://www.whatis.com (accessed Feb.2000) 8 to a list of Web pages that match that keyword. Even when a person follows the directions precisely, search engines do not work that well.
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