The recent market downturn has turned sentiment against the Internet portal concept, and the next 12 months will see a lot of consolidation among portals in Asia-Pacific, according to a report released Friday by market analyst International Data Corp. (IDC).
As the going gets tough in financial markets, Internet users in Asia soon will find their choice of portals will diminish due to consolidation, the analyst firm predicts. IDC expects three to five horizontal portals to survive in each country, with key markets such as Taiwan, South Korea and Australia supporting a few more.
IDC noted in the report that there is real concern about the ability of portals to generate revenue. Most are spending their capital and are nowhere near profitability. Electronic commerce revenue has yet to materialize and advertising revenue is dwindling, IDC said.
Even portals with good visibility should not expect investors to pump in more capital, given the current market sentiment. Investors are more closely scrutinizing balance sheets and it is unlikely they will continue sinking funds into loss-making ventures, IDC said.
Even mergers and acquisitions will be hard to achieve, since cash – rather than devalued stock – will be required to close such deals, according to IDC.
To avoid the shakeout, portals need to consider several approaches, according to IDC. These include:
– Alternative revenue streams. Most portals cannot live on advertising alone. Investors want to see other sustainable revenue streams, and a WAP (Wireless Application Protocol) angle alone is not going to cut it.
– Communities. User groupings, be they along ethnic, cultural or common-interest lines, will be key. These will be crucial for getting users to part with their cash for information or e-commerce orders.
– Advertising. The days of charging per impression are gone. Portals will have to find ways to get better results, and pricing of ads based on the results advertisers see will become common.
It will take a few years before revenue streams, apart from advertising, will make Asia-Pacific portals viable. The challenge for portals is to survive until their business models begin to make sense in the context of the economic environment, IDC said.
IDC is a subsidiary of International Data Group Inc., the parent company of IDG News Service.
IDC Asia-Pacific, in Singapore, can be reached at http://www.idc.com.sg/.
