In the Spotlight

News & Features
Mergers Changing Face of Internet
By Jon Gordon
February 3, 1999
Click for audio RealAudio 3.0 28.8

Deal-making in the Internet business has reached dizzying heights. The latest multi-billion dollar blockbuster has Internet directory service Yahoo! buying the online community GeoCities. Other recent deals include America Online's purchase of Netscape, and high-speed Internet access company At Home's acquisition of Excite, a popular Internet directory. The consolidation frenzy is likely to affect average Internet users in some very real ways.

EVEN THOUGH THE STOCK for many Internet companies is through the roof, most are not making money. Neither At Home nor Excite have ever turned a profit. Bill Loving, technology editor at the Los Angeles Times, and formerly of the Star Tribune, says Internet investors and venture capitalists are growing impatient to see profit, and that's forcing big Internet companies to eat small ones to increase their market share.

Loving: These companies really do have to figure out how to make money and soon. The way they are doing it now is just going for mass-merging, trying to gain some competitive advantage over everybody else by coming up with the ideal whatever the magic combination is, of network and content and portal and e-commerce and that sort of thing.

When companies find that magic combination, the rewards are huge. There's big money to be made selling ads and collecting fees from electronic commerce. One formula that many Internet companies are now chasing is this: amass a huge amount of viewers to a site, give them lots of quality news, entertainment and services like free email, and make sure they don't have to wait long for Web pages to appear on their screens. At Home corporation had one piece of that formula: fast internet connections for its customers. Excite has 20 million registered users and plenty of material for them to look at. Together, the companies are confident they can make a go at this business.

A web site called Snap is chasing the same goal. Snap, like Excite, is a so-called "portal", a gateway to the Web. And it has a powerful partner in the National Broadcasting Corporation. Snap recently announced deals with telephone companies for a new portal designed specifically for the growing number of people who have faster-than-normal connections to the Internet.

Shawn Hardin, Executive Vice President and creative director at Snap, says his web site can offer better things to read and watch if the constraints of slow-as-molasses telephone modems are eliminated. For instance, people who browse TV listings on Snap, using a standard internet connection, get plain text and little else. Hardin says a supercharged Snap designed for raw speed can give consumers more useful and exciting information.

Hardin: So you could go in and see your on-demand clip of "E.R." or your on-demand clip of "Friends" and find out if it's an episode you might be interested in or if it's a repeat or what the situation is. And we think the ability to request on demand that 30-second clip which has been produced in the last few days and now delivered to you when you want it is a much richer experience than sort of scrolling through text and information.

So-called broadband Internet access, through cable modems, digital phone lines and even tiny satellite dishes, is good for advertisers, too. Internet portals will live and die by ads, and big advertisers like the idea of hawking their products with high quality Internet multimedia. The closer they can get to a TV-like ad, the more they will advertise. So Internet portals will continue to push hard for a more rapid roll-out of high speed connections.

Another consequence of the recent mergers and acquisitions is that small, independent Internet access and content companies are quickly falling by the wayside. They rise again as parts of bigger companies, frequently long established media companies like NBC and Disney. The Internet may end up like cable TV, where there are plenty of things to watch but only a few major channels. As the big Internet networks emerge, there may be a little less variety, and independent spirit, on the Web. Snap will be eager to show you those clips of NBC-TV shows E.R and Friends because Snap is part of NBC. Another Internet portal, is owned by Disney, which owns ABC. Rebecca Eisenberg is a columnist for the San Francisco Examiner. She says be aware: portals want to sink their hooks into you.

Eisenberg: It's wise for a consumer to be on the lookout that there's a reason why Disney's web site links only to Disney movies and has so many advertisements for ABC television shows. Consumers need to be aware that they might not be show what is out there, but rather what is out there that's owned by the same company that owns that portal site.

To put it another way, the 3-piece suits are taking over the Internet. Bill Loving says a little of the Net's shine has worn off.

Loving: A lot of web sites really were labors of love by people who thought they were changing the world and participating in the birth of a new medium. That can only take you so far. You've got to make a living off it at some point.

Increasingly, it appears that in order to make a living from the Internet, many companies need to get bigger, and they need big partners with deep pockets. The days when Internet companies began with a big idea but few resources appear to be fading. And that means changes for Internet users.

Jon Gordon covers technological stories for Minnesota Public Radio and is the host of MPR's Future Tense. Contact him at