De-portalization and Internet revenues

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.


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.


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

2004 and all that

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

The rise of the foothills

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

The future pattern of web 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.

edgeio is hoping to play a role in these trends. We will talk about some new products later in the month that follow from this approach.

Discussion

Kevin Burton
Techmeme
Mike Arrington
Syntagma
Keith Teare’s Weblog
Dan Farber at ZDNet
Mark Evans
Fred Wilson
Ivan Pope at Snipperoo
Tech Tailrank
Collaborative Thinking
David Black
Surfing the Chaos
Ben Griffiths
Dave Winer (great pics)
Kosso’s Braingarden
Dizzy Thinks
Mark Evans

Published by

Keith Teare

I am ceo and a founder of edgeio.

52 thoughts on “De-portalization and Internet revenues”

  1. Pingback: Snipperoo
  2. “Sufficiently tall mountains have very different climatic conditions at the top than at the base, and will thus have different life zones at different altitudes on their slopes. The plants and animals of a zone are somewhat isolated when the zones above and below are inhospitable, and many unique species occur on mountainsides as a result.” (wikipedia)

  3. Wow, what a publisher centric view or world.

    You’re picture is missing the user/ consumer. You know the the stakeholder with scarce attention and abundant content and distribution choice – limitless choice!

    So let’s say the user is represented by water in your model. In addition to the foothills rising, the water will be is rising 10x as fast – the glaciers are melting right. So when we reach 2010, all the mountains are underwater including the foothills.

    That’s when the user will be in control. Want to monetize the user’s attention? Then you MUST bring a valid value proposition, and probably a trusted recommendation too, to the table to gain access to user attention.

    To me de-portalization is about users taking control not the publishers.

  4. That forest in the foothills looks quite Tangled. 😉

    This is a good thread. Fred kicked it off well I think. It will be interesting to see;

    a. How much more acquisition the ‘mountains’ do?

    b. Whether they stay mountains or become ‘networks’ like ye olde media networks. The brand behind the mediums.

    c. Whether some foothills resist acquisition (like indie bands resisting record deals) and hold on to grow up big and strong?

    Building something like Tangler in this environment is like hitting a moving target from a moving vehicle with a moving instrument, and you have to do it every day.

    Maybe that’s why it’s so much fun.

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  6. So what is your definition of a “publisher”, and by whatever definition, how is a publisher not also a middleman?

    I don’t believe we are headed to a world of foothills. I think the foothills will slowly erode until all we are left with are alluvial fans.

  7. As a fairly large Adsense publisher, I disagree with this statement (at least for now based on my experience over the past 2-3 years):

    “…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.”

    I’ve found that many advertisers are willing to pay 2-3X per click on Adwords what they’re willing to pay us directly. They happily pay Adwords a CPM or CPC, but refuse to pay us on a CPM or CPC if we work directly.

    Here’s why a 3rd party network like Adsense creates value even for those of us in the foothills…

    – it creates leverage (forces advertisers to accept CPC which puts the onus on them to ensure their sites convert, ultimately increasing their ability to bid for customers)
    – saves us from hiring a salesforce
    – eliminates collections hassles

    Google started out by aggregating an audience, but I think their magnum opus will be their ability to attract the worlds largest network of advertisers.

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