• by February 22, 2001

By Ken Liebeskind

It seems that the decline in Web portal traffic would lead to a complementary decline in portal advertising, but that's not necessarily the case.

"The impact on ad dollars doesn't depend on reaching all people, but reaching the right people," says Eric Valk-Peterson, VP of media services for I-traffic, a division of Agency.com in New York. He says the drop in portal traffic, which has been reported by Media Metrix and other third party firms, doesn't necessarily result in fewer ad buys, because media buyers don't look at the aggregate numbers when they place portal buys. "We look for an audience profile and what they're engaged in," he says, noting the advertising seeks to reach users engaged in specific activities, such as researching a car buy or a vacation. Also, he doesn't make run of site buys, so the aggregate numbers of visitors to a portal isn't really relevant. Instead, he buys areas of portals to reach specific users.

However, if traffic on those specific areas drops, ad buys will, too. "If we see a skewed decline against a lucrative audience, such as shoppers or businesses, that will hurt sales," Valk-Peterson says.

Rudy Grahn, online advertising analyst at Jupiter Media Metrix, agrees that the quality, not the quantity of the audience is what distinguishes first tier from second tier portals. "The quality is determined by the degree to which they go to the portal to research and make purchases," he says. The best predictor of purchasing behavior is tenure. "The longer they're online, the best chance they have to transact."

He says Yahoo has credibility among tenured surfers, while Disney's Go.com, which closed recently, "ran with no value to the tenured surfer."

Two other portals which reported recent drops in visitors are NBCi and Lycos. NBCi "did a simplistic job of leveraging the strength of its online and offline properties," Grahn says. "It hasn't leveraged any unique application or synergy between the two properties. They mention it on TV, but there's nothing there. It generates traffic but not monetizable traffic."

He says the most popular portals are the ones that were "organically built" rather than started by a giant media property like NBC or Disney. About.com, whose visitors grew 72% from Jan. 2000 to Jan. 2001, "was built by word of mouth and referral. They have quality users, so they're more monetizable than other portals."

A lot of the portal advertising has been done through partnership deals, such as the one between Homegrocer and AOL that made Homegrocer the online grocer for the AOL portal. But NBCi "was too late to get into that, and Lycos, too," Grahn says.

Valk-Peterson says two major reason portals are losing traffic is because there are too many of them and they have stopped buying advertising to support themselves. Portals evolved from search engines to navigational tools, but "there's not enough room for 20 plus portals," he says. The drop in dot.com ad