The universe of websites has a very long tail, and soon it will be clear that earning real estate on those websites will be the primary mission of every major portal. Widgets will play an ever-increasing role in this evolution.
Prediction: Portals like AOL, MSN and Yahoo will eventually generate more impressions and ad inventory by exporting widgets to third-party websites than by serving retail traffic within their own domains.
Most people are still trying to figure out what widgets really are and their importance, but few are looking at the role traditional internet portals will play in this new ecosystem. The major content portals like AOL and Yahoo used to define "distribution" when it came to web content (as both creators and acquirers of original content). Then widgets came along and increasingly "distributed" that distribution power to individuals and their personal pages (e.g. social networking pages, blogs).
The problem for traditional portals is that content producers and third-party widget providers increasingly have convenient ways to bypass portals by distributing content and other user experiences directly to consumer-controlled pages. While the major portals often own social network traffic (e.g. AIM Pages) and feed aggregators (e.g. MyYahoo), that traffic increasingly is splintered by third-party content and widget providers. In short, the entire web community is aggressively fishing in portal waters, and there are good reasons to expect that trend to accelerate.
The first step in recognizing that future growth lies beyond their portal walls was expressed through a series of multi-billion dollar acquisitions of various advertising platforms: AOL buys Tacoda, Yahoo buys RightMedia, Google buys Doubleclick, Microsoft acquires aQuantive, etc, etc, etc. But how will these ad networks compete for inventory across the ever-expanding universe of independent websites?
CPM guarantees and ad intelligence are ultimately limited product differentiators because hyper-competition can only mean commoditization and profit erosion, and mega agencies like WPP are also entering the advertising network game with their own acquisitions (e.g. 24/7 Real Media). What's a traditional portal to do?
There are several possibilities, but I believe the winning strategy for traditional portals is to extend the reach of their advertising platforms by offering independent web publishers something portals have produced very well for years within their own domains: compelling content and highly interactive user experiences. To do this, portals must package and deliver these experiences in a highly viral, self-serve fashion. That means widgets.
Portals can evolve into hubs that serve an essential purpose in the evolving widget ecosystem, connecting the creators of content and interactive user experiences with the universe of independent websites. So in addition to inviting third-party content widgets into their own environments, portals that wish to thrive must also become major exporters of content and interactive user experiences. "Open-Portal" or maybe even "Anti-Portal" may be the best way to describe this new beast.
But will marketers, web publishers and content creators willingly submit to portal hegemony once again? The answer is yes, I believe, so long as portals deliver what these players really need. Creating richer media experiences and more audience interaction requires increasingly complex technology. So the kind of portal widget platform I'm talking about must include functions such as easy media management, profile management and administration; consumer experiences now require more technology than most publishers and content creators can reasonably afford.
Portal platforms must also distribute widgets that click to deeper user experiences (e.g. "Deep Widgets") on landing pages that engage users with both editorial and user-generated content. In that sense, widgets distributed by portals become windows into richer, more engaging user experiences that generate incremental ad inventory, monetized by both portals and their website affiliates. These landing pages must maintain the branding of independent websites with the help of APIs, CSS and customizable templates, and must similarly enable member and profile integration with the existing user base.
The idea of internet portals morphing into "wholesalers" of programming to many thousands of "affiliates" should not be surprising. Wholesale distribution is the driver of nearly every major industry (from manufacturing to major media). The television and film industries have worked that way for decades. NBC earns the right to sell advertising across thousands of independent television stations by providing those stations programming that is often aggregated from many sources. Similarly, internet portals must earn the right to place advertising across the entire internet by leveraging a sophisticated platform to distribute both content and interactive programming.
While portals like Yahoo and AOL may capture dominant market share relative to other websites, their audience growth is modest relative to the aggregate audience of large and small websites across the internet. The universe of websites has a very long tail, and soon it will be clear that earning real estate on those websites will be the primary mission of every major portal. Widgets will play an ever-increasing role in this evolution, and marketers, for one, are beginning to take notice.
Eric Alterman is the founder of numerous venture-backed technology companies, including KickApps, MeshNetworks, Triton Network Systems, SkyCross, TeraNex and MILCOM. .