De-portalization and Internet revenues

Posted by Keith Teare on http://blog.edgeio.com/?p=57
on December 11th, 2006 at 07:12

This post is a little more philosophical than most that you will see here. It provides a little bit of background as to why edgeio is in the business of bringing together, organizing and distributing listings to the edge of the network. In short it is because we believe that the Internet is moving away from big centralized portals, which have gathered the lions share of Internet traffic, towards a pattern where traffic is generally much flatter. The mountains, if you will, continue to exist. But the foothills advance and take up more of the overall pie. Fred Wilson had a post earlier this week about the de-portalization of the Internet which is essentially making the same point when seen from the point of view of Yahoo.

The following 3 graphics illustrate what we believe has happened already and is likely to continue.
The first picture is a rough depiction of Internet traffic before the flattening



The second picture is a rough depiction of today - with the mountains still evident, but much less so



The third picture is where these trends are leading. To a flatter world of more evenly disributed traffic.



Some of the consequences of this trend are profound. Here are our top 10 things to watch as de-portalization continues..
1. The revenue growth that has characterized the Internet since 1994 will continue. But more and more of the revenue will be made in the foothills, not the mountains.
2. If the major destination sites want to participate in it they will need to find a way to be involved in the traffic that inhabits the foothills.
3. Widgets are a symptom of this need to embed yourself in the distributed traffic of the foothills.
4. Portals that try to widgetize the foothills will do less well than those who truly embrace distributed content, but better than those who ignore the trends.
5. Every pair of eyeballs in the foothills will have many competing advertisers looking to connect with them. Publishers will benefit from this.
6. Because of this competition the dollar value of the traffic that is in the foothills will be (already is) vastly more than a generic ad platform like Google Adsense or Yahoo’s Panama can realize. Techcrunch ($180,000 last month according to the SF Chronicle) is an example of how much more money a publisher who sells advertising and listings to target advertisers can make than when in the hands of an advertiser focused middleman like Google.
7. Publisher driven revenue models will increasingly replace middlemen. There will be no successful advertiser driven models in the foothills, only publisher centric models. Successful platform vendors will put the publisher at the center of the world in a sellers market for eyeballs. There will be more publishers able to make $180,000 a month.
8. Portals will need to evolve into platform companies in order to participate in a huge growth of Internet revenues. Service to publishers will be a huge part of this. Otherwise they will end up like Infospace, or maybe Infoseek. Relics of the past.
9. Search however will become more important as content becomes more distributed. Yet it will command less and less a proportion of the growing Internet traffic.
10. Smart companies will (a) help content find traffic by enabling its distribution. (b) help users find content that is widely dispersed by providing great search. (c) help the publishers in the rising foothills maximize the value of their publications.

Update: 11am Pacific, Sunday 10 December
Several commentators are seeing the word “de-portalization” (first coined by Fred Wilson) and reading “end of portals”. To be clear, and apologies if I wasn’t already, de-portalization represents a change in the relative weight of portals in a traffic sense, and the emergence of what I call the “foothills” as a major source of traffic. This will affect money flows. Portals will remain both large and will continue to grow. But relativeley less than the traffic in the foothills. The foothills will monetize under greater control of its publishers and the dollar value of its traffic is already large and will get much larger.

Plug-Ins, Apps and Components
The term has also been applied to various types of software. In the Opera Web browser, a widget is a plug-in that adds functionality, just like an "extension" in Firefox. In the Macintosh, widgets are mini-applications written in JavaScript that are launched from the Mac Dashboard or desktop. The term is also used to describe software components used as Web services. See widget set, Dashboard, gadget and Web services. - http://www.answers.com/