A study Jupiter Communications will release at this week's "Jupiter Online Advertising Forum" in New York finds marketers taking a show-me attitude to portal deals, opting for shorter agreements and tying compensation to performance rather than just reach.
"I think portals are past the point of not having to prove themselves," said Michele Slack, lead analyst on Jupiter's portal critique. "Every dollar is being held accountable."
`THERE USED TO BE A MYTH'
Portal deals escalated last year when cost seemed no object, with continual announcements of deals such as the $89 million, four-year pact drkoop.com struck with America Online. Drkoop now is struggling to stay alive and has renegotiated the deal.
Web portals are under pressure from dot-coms, which lack the cash and inclination to do big deals, and traditional marketers, which demand more performance.
Among dot-coms, Ms. Slack said, "there used to be a myth" that a big deal with Yahoo! or AOL was an IPO maker, providing exposure to consumers and attracting attention on Wall Street. If a dot-com were to hype a deal with a portal today, "the Street's going to question why you are pouring all this money into one place." Internet companies more likely will cut shorter-term deals with portals rather than sweeping multiyear pacts, Ms. Slack added.
Major marketers are still doing deals, such as recent promotions struck between Target Stores and AOL as well as Pepsi-Cola Co. and Yahoo!. But Ms. Slack said portal deals are shifting more from cash to barter; Pepsi's five-month promotion gives Yahoo! exposure on bottles and in-store displays.
Even top-tier destinations such as AOL, Yahoo! and Microsoft Corp.'s MSN must prove they're worth the price. Second-tier properties, such as Lycos and Go Network, need to stand out by offering a better deal, more pay-for-performance or a more targeted audience, Ms. Slack said.
"You can really push for terms" with portals, Ms. Slack said. "This is a great time (for advertisers). They can use everything they've learned to date and drive a better deal."
Extended portal promotional agreements are big investments: One-third of respondents to Jupiter's May executive survey allocated more than 40% of online marketing budgets to portal deals.
But executives were underwhelmed at how deals have performed. The survey found executives were somewhere between "neutral" and "dissatisfied" in how deals generated sales or leads, which they saw as the most important evaluation metric. They were between "neutral" and "satisfied" on the second-most-important measure -- how portals generated click-throughs and traffic.
BAD NEWS FOR E-TAILERS
While a portal by definition generates large traffic across its sites, that does not necessarily translate into major traffic or business for deal partners, who may get lost amid the clutter. A Jupiter consumer survey found more shoppers steering clear of portal shopping sections and going directly to vendors' sites (See chart). Just 2% of e-shoppers started their excursions in a portal shopping center. That's bad news for e-tailers that bet big on portals.
Ms. Slack said it would make sense for many marketers to skip broad portal deals and put the money into targeted buys -- picking, for example, specialty sites and well-performing areas within portals.
"In today's market," she said, "the portals have to prove their value."