• by June 4, 2001

Myth: Severe market dominance is impossible on the Internet because the number of potential online channels is infinite. Reality: Online media consolidation is occurring rapidly, especially when considering control of people's time online.

Jupiter Media Metrix, the global leader in Internet and new technology analysis and measurement, today reports that the total number of companies controlling 50% of U.S. user minutes online shrank 64%, from 11 to four, between March 1999 and March 2001. Even more drastic was the drop in the number of companies controlling 60% of all U.S. minutes spent online: from 110 in March 1999 to 14 in March 2001, an 87% decrease.

"The Media Metrix data show an irrefutable trend towards online media consolidation and indicate that the playing field is anything but even," said Aram Sinnreich, Jupiter senior analyst. "The Internet may provide an opportunity for new players like Microsoft or Yahoo! to become serious media companies, but so far a major share of the market is being absorbed by a handful of companies, with those same companies continuing to direct traffic across their own networks of sites. Media companies competing for the attention of consumers must consider that while the key barrier to online entry and success used to be infrastructure, it has shifted dramatically to advertising and marketing."

According to Jupiter analysts, three key factors are driving online media consolidation:

· First, mergers and acquisitions have turned already powerful companies into even more powerful media behemoths. For example, in March 1999 AOL and Time Warner were both among the 11 companies controlling 50% of all user minutes - ranked number one and 11, respectively. Today, AOL Time Warner, the product of their merger, is ranked number one.

· Second, major media companies have significantly increased their ability to differentiate online offerings through quality of presentation, intensity of marketing and integration with offline programming. As the toolset for online programming has improved and budgets for Internet projects have climbed at traditional media companies, the quality gap between Internet-only offerings and those of their established offline competitors has broadened.

· Lastly, economies of scale apply to online businesses as much as they do offline. As funding and stockholder patience have evaporated over the last year, online businesses without self-sustaining revenue models or potential cost-savings for their parent companies have spiraled towards extinction.