Is AOL’s Portal The Only Game In Town?

According to a new report by Forrester Research, Inc., America Online’s new Shop@AOL is the only portal worth the hassle.

Forrester noted that other portals resemble suburban strip malls when compared to AOL. Shopping areas at Yahoo! , Lycos, Excite and Go Network are described as “little more than indexed search sites renamed ‘shopping,’ with little or no emphasis on merchandising.”

Pricey portal deals, which currently range from $2 to $10 million (US$) per year, are critical to driving consumer traffic to e-marketers this holiday season and beyond. In the survey, Forrester asked both pure-plays and brick-and-mortar retailers about the strategies they were taking with portal deals. The respondents offered the following pointers:

Negotiate short-term deals. A power shift has occurred in portal deals: Declining banner click-through rates have flattened pricing, and contract lengths have shortened. One pure play’s deal with Yahoo! “is month to month,” Forrester said.

Treat inflexibility as a hidden cost. The survey found that the value of a deal changes as portals fall short on service, staff and technical requests.

Get into bed with AOL. Despite the inflexible culture and poor partner service, e-tailers repeatedly cite AOL deals as the most profitable. A brick-and-mortar retailer with deals across all of the major portals was quoted as saying, “Unfortunately, AOL can afford to be inflexible. They are our best relationship by far, and all we have is a button on their shopping channel. It is the only portal that pays for itself — every dollar yields multiple dollars in return.”

Go For The Galleria, Not The Strip Mall

Forrester added that it expects experienced retailers to continue to vote with their feet and move the bulk of their spending to AOL — relegating other portals to performance-based deals. Why?

According to Forrester, AOL’s online shopping channel features well-known and respected retail brands like Gap and The Sharper Image and enforces stringent technology requirements for graphics quality, customer service and site performance.

Time To Eat Humble Pie

It may already be too late for these portals to switch gears with the holiday season at hand, but if I were the CEO of any one of them, I’d get my hands on a copy of this report — and pronto.

For years, some portals have looked down their noses at the unsophisticated AOL, but now it’s time for them to have a double helping of humble pie.

Instead of trying to reinvent the wheel, these portals should begin imitating AOL’s model — to do otherwise will only widen the gap between them and what seems to be the only game in town.

What do you think? Let’s talk about it.

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