Internet Portals Leave Adolescence Behind

By now, you have probably realized that Yahoo! (Nasdaq: YHOO) is up to something.

Just this week, the company cut a deal with Cigna (NYSE: CI), agreeing to build a custom portal for the health care heavyweight. Doesn't sound like the zany, business-casual Yahoo! we've grown to love, does it?

Last month, Yahoo! hip-checked Monster.com out of the bidding war for HotJobs.com, with a hostile US$436 million offer.

In his six months at the portal's helm, Yahoo! CEO Terry Semel has aspired to just one goal: profitability. Yahoo's recent dealings signify a distinct culture shift, not only within the company, but in the Web portal space.

So portal devotees beware. The days of free information and services for all may be over soon.

Grab Bag

To date, portals like Yahoo! and Microsoft's (Nasdaq: MSFT) MSN have offered a little bit of everything. And I mean everything. Crammed onto their home pages are bits of news, directories, online shopping, games and other offerings.

Until recently, portals fed their top lines with steady streams of advertising dollars. After the online advertising market faltered, executives like Semel were forced to ferret out new ways to bring in the dollars.

Building Bridges

I don't blame Yahoo! in the least. With the advertising market on a slow comeback and an industry-wide mandate for profitability, Semel is trying to bring Yahoo! out of adolescence into adulthood.

On top of the Cigna and HotJobs deals, Semel is eyeing the Internet service provider arena. Jointly with SBC Communications (NYSE: SBC), Yahoo! will offer co-branded high-speed Internet access to SBC's 3.6 million subscribers by mid-2002.

For its part, MSN has entered into a promotional deal with automaker Volvo. Similarly, AOL Time Warner (NYSE: AOL) has agreed to market Unilever (NYSE: UL) products online and on television.

Sharper Image

So, what do these new revenue strategies mean for loyal portal users? We should count on a small upside and potentially a big downside.

First, the good news. The inch-deep and mile-wide dilemma faced by most portals is likely to go away.

Rather than serving up a little bit of everything, portals will begin to deepen and taper their offerings.

Powerful Packages

Further, Web development deals -- like those Yahoo! struck with Cigna and Sony -- will bring scalable Internet expertise to the brick-and-mortar companies on which we all rely.

Re-packaged technology from Yahoo! and other portals, which has graduated through many development cycles can only help the product and service offerings of old economy companies.

And as end-users, we ultimately will benefit.

Location, Location, Paid-For Location

Now, the bad news. Remember how Yahoo! and other portals went to market? Exhaustive directories of vital Web sites, sometimes hand-combed by human editors, drew droves of needy surfers.

With content becoming more closely tied to revenue, the neutrality and accessibility of portal-hosted information will suffer.

For instance, Yahoo! plans to deploy a sales force to sell directory listings. As did rivals MSN and AOL, Yahoo! already partnered with Overture (Nasdaq: OVER), which sells search engine prominence.

Looking for information on vacation venues or business schools? Soon enough, all of the portals will answer inquiries like these with sponsored information first and topically relevant information second.

Paying Dues

What's more, content and services we've enjoyed at no cost will soon carry fees. Have you come to rely on your Yahoo! e-mail account? Don't flinch if this service requires a subscription by year's end.

Indeed, Semel has announced to the press his plans to charge users for access to premium news, sports, music and other content.

Growing Pains

We may feel like mounting a protest, in the name of some constitutional right to information. But in reality, the novelty of the Web is officially gone, and with it goes the free passes we've enjoyed.

As evidenced in the portal space, Web businesses are starting to bow to the same financial constraints as those in the physical world.

I suppose we all knew it was coming. But we can still gripe about it.

What do you think? Let's talk about it?