Companies must keep portal sites in perspective

More and more European companies are forming partnerships with portal sites – online destinations combining search and content tools – to drive traffic to and transactions on their own e-commerce sites.

Research shows that two-thirds of Europe-based e-commerce executives see such deals as a major part of their online business development.

Does this mean that European portals will follow the way of US portals, where multimillion dollar exclusive contracts are common?

Absolutely not. There are signs that e-commerce executives are already looking beyond the simple volume of traffic that portals can contribute. Instead, they want partners that can deliver focused, buying consumers, and are looking increasingly to set up affiliate programmes with complementary Websites.

This scepticism is apparent in the portal deals European executives favour. They place bets on all the players, signing brief and flexible partnership deals.

Distribution opportunities beyond the portals are also increasing in importance. New Internet appliances and free ISPs will provide new ways to bypass portals and connect to a targeted base of online customers. Companies will also be boosting direct site traffic by increasing off-line promotional spending.

So where is this all leading? Financial disappointment for most portals. In Europe, 43 companies – both US invaders and native start-ups – are operating 95 consumer portal sites and vying for a relatively small pool of online users scattered across 15 countries. The economics – modest online ad revenues, low transaction fees and high cost structures – will drive most players out of business. Only strong US entrants, such as Yahoo! and telco-sponsored portals such as France Telecom’s Voila and Telefonica’s Olé, are positioned to survive in the new environment.

The imminent shake-up does not mean businesses should shy away from building portal deals now – especially if they just need traffic to get e-commerce off the ground – but they should be cautious.

And what about advertisers? My tips are: cultivate relationships with portal winners such as Yahoo! and T-Online; make offers lower than the ratecard and push payments towards transaction and customer acquisition-based deals; secure top position, avoid banner ads; and put more than three clicks into a site which generates the least awareness.

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