The Portal Dilemma

Yahoo just announced its entry into the tech publishing world with the launch of Yahoo Tech. Coverage by Mike Arrington, NY Times and John Battelle.

As I mentioned in this post, the big portals (Google, Yahoo and soon MSN) are powering the ad platforms of many media companies while at the same time creating their own competing content.

Here is what’s really going on:

Yahoo and Google get 100% of the revenues on each click happening on their pages, but only about 20-30% of that same click taking place on a publisher page (via Google AdSense or Yahoo’s YPN). So a user on a Yahoo/Google page is worth to them about 4-5x what the same user does on a partner publisher page.

The dilemma therefore is not really much of a dilemma at all – A portal will always strive in the long run to create its own content and attract as many users directly to it, and away from its partner publishers.

By powering the ad sales on other media companies via AdSense/YPN, the portals are leeching on these assets to grow their own advertiser base to be used on their content pages, like Yahoo Tech.

At the end of the game (as I described in this post), the portal stays with the traffic and the advertisers, while the publisher stays with declining traffic and no advertisers.

So when choosing a partner for powering a content-targeted ad network, the first question a publisher should ask is: Am I being leeched by a portal that wants to take away my business?

If the answer is ‘yes’ (or even if it’s ‘no'[1]), you should be looking at independent non-competing companies like Quigo (disclosure: I’m founder and employee of Quigo), IndustryBrains, etc.

[1] If Google or Yahoo ain’t competing with your content or service today, take my word on it – they will! The 5x dilemma just makes it such a non-brainer for them over time to compete on content and services and attract the users over to their pages, even if they spend all their time denying this.

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