Solutions for Communities of Interest: The Portal

-- Anjana Srikanth

Contrary to popular belief there is such a thing as a profitable venture on the web. Success online comes from two factors - value to the customer and value to the company. Most of us understand the value to the organization and are able to relate to it readily. But very few of us understand that the key to achieving this is to understand the value to the customer. And what does this mean? It means understanding your customers within the time frame and context to achieve business objectives.

Many of the existing business models on the web are a mere extension to their online counterparts, but the web can also redefine traditional business models. What the web does is that it helps us do things that we normally did in slightly different ways. And if this generates added value to the business, then isn't it a case for consideration? New business strategies that take advantage of the net as a many-to-many interactive medium that emphasize communication and community are what we are going to study here.

The what

In business-speak a portal is an infomediary. What does an infomediary do? It brings buyers and sellers together by providing content in the form of advice, services or any other benefits. A portal is a content aggregator - content in the form of information, knowledge or experience. Example: Yahoo.com; autobytel.com, e-loan.com, travelocity, expedia and instill.com.

A portal is synonymous with a gateway or a COIN (communities of interest)- a major starting site for users when they get connected to the web. Typical services that a portal offers include a directory of websites, a facility to search for other sites, news, weather information, email, stock quotes, phone and map information and sometimes a community forum.

The how

How do portals make money? After all they don't really own anything. They rely on their partners for all the money. Now isn't that one of the most unpredictable ways of making money? But surprisingly, the current statistics show that portals or rather these infomediaries dominate a lion's share of the business and will continue to do so in the future.

To understand how they make money, we need to understand how a portal works.

Where does a portal make money?

It connects buyers and sellers on the web and provides value by offering content in the form of advice, personal service or other benefits. In Internet parlance, it's playing the role of an infomediary or a content aggregator that offers information, knowledge, or any experience that adds value to a particular e-business transaction.

It focuses on numerous partnerships, on maintaining extensive content and promoting the site and its services to potential buyers and sellers. The main sources of revenues are commission, advertising, tenancy deals, and supply-side subscriptions.

By offering specialized content/information within a vertical industry, like vertical.net they create value by reducing the time and complexity of transactions. Vertical.net, one of the fastest growing facilitators of industry-specific content for B2B commerce on the net brings buyers and sellers from a particular industry together. It's website, wateronline attracts more than 100,000 visitors a month. With services like latest news, online directories, personalized advertisements, targeted email newsletters of products and services, and a facility to create an individual company website within the main portal makes it a major commerce facilitator.

Personalized advertising, hosting websites, building and designing websites, sponsoring discussion forums, and negotiating a percentage of each transaction that takes place on the online marketplace form a part of any portal. Such sites may not start with too many transactions happening, but as they capture valuable buyer and seller information in the matching process, there exists immense opportunity to make their portal an e-commerce hub for that particular vertical. Sponsor loyalty enables this while customer loyalty follows.

As long as there is an industry with a lack of knowledge and ignorance about prices and performance of products, there will exist a profit zone for portals of this kind. (Autobytel.com, Autoweb.com, Get-smart.com, E-loan)

What are the functions of a portal?

1. Aggregation of needs
2. Aggregation of services
3. Negotiation and notification services
4. Consulting services
5. Creating demand
6. Matchmaking
7. Up selling

Useful Insights

Portals understand that they have value because they can command the attention of large numbers of visitors to the E-conomy. But the key point that many portal owners miss is that they need business partners more than they need users. The portal site is not the product, instead "eyeballs" are the product and the portal's advertisers, E-conomy partners, and content providers are its consumers.

A portal can't survive without attracting and retaining eyeballs. More importantly, it needs to attract the right kind of eyeballs. It needs to build relationships that keep their customers coming back at a profit. A sticky site creates customer loyalty by offering the content, the community and the context.

Allowing a customer to create a website on the portal that talks about the customer's specific services is a sure-fire way of ensuring customer loyalty. "Sticky applications", like these are where the customer makes investments by creating individualized content. When the portal takes such a personal interest in the customer's business model it's bound to have the customer for life.

A portal doesn't have to be large - both in terms of its customers and sponsors. This would mean greater investment in hardware and infrastructure and more costs. The battle should be about the business of potential advertisers and merchants. This market will be the chief source of revenue and the relationships that are built within this market through the portal are what make the difference.

Banner ads and traditional mouseovers don't work: they form the traditional advertising method of interruption marketing where the visitor is interrupted from his focus when he clicks on a banner ad. Buyers are less willing to give a part of their attention away today. Instead if they are rewarded for giving away their attention through a contest, a prize or a game, they just might be interested enough. This is an example of permission marketing and describes another business model that the net is breeding today.

What do you look for if you are interested in creating a COIN or a portal?

1. Identify inefficient digital value chains - where there is a glut of information in a particular industry - large markets with significant fragmentation - multiple independent buyers and sellers who operate independently
2. Products in a particular supply chain that come in a complex configuration and require simpler sales and distributor channels.
3. Industries with complicated or expensive distribution processes - the portal will provide a valuable single and uniform platform4. Symmetries in a value chain.

Questions you need to ask while building your portal:

1. How efficient is the relationship between buyer and seller?
2. How digitizable is the product or service?
3. How customizable is the product or service?
4. What is the balance of power between the buyer and the seller?
5. How fragmented is the market in which you operate?
6. How ready are the customers to accept new ways?
7. How critical is the need for speed in the delivery of the product or service?

What can a portal grow into?

A portal that plays by the rules and studies the markets effectively can become a major e-commerce facilitator in that vertical industry that it chooses to focus on. (travelocity.com). A variety of business models can be combined to form other kinds of transformed portals - for instance becoming a virtual order desk like instill.com, or NetBuy, a B2B infomediary that matches buyers and sellers, the value proposition being that of immediate order fulfillment.

Being a success on the web doesn't mean that a business model once adopted cannot be changed. A successful portal is the right mix of business models, a dash of an online brokerage model (e-Bay) mixed with a trust enabler model (Paypal) and maybe even an online mall, whichever model is the most strategic and grants the maximum ROI.