March 20, 2007 4:00 AM PDT

Broadband providers looking for sweeter deals?

A new kind of Internet portal war is brewing as broadband providers begin flexing their muscles to renegotiate more-favorable deals with large Internet brands such as Yahoo and Google.

Last week rumors were flying that AT&T was unhappy with its existing broadband portal deal with Yahoo. And this week, The Wall Street Journal reported Comcast wants a bigger slice of the revenue pie in its deal with Internet search giant Google.

AT&T and Yahoo have downplayed the rumors, saying they are actually expanding their relationship. Meanwhile Comcast and Google remain mum on their deal, but insiders say that Comcast is re-evaluating the Google partnership as part of a broader deal it's considering to add advertising to its Web site.

Whether AT&T eventually splits from Yahoo, Comcast ditches Google or neither of those possibilities comes to pass, one thing is clear: broadband penetration has changed the game, and new Internet power brokers are emerging, making it necessary for players to renegotiate deals made only a few years ago.

"ISPs have always faced a challenge when it comes to attracting customers to their portals," said Joe Laszlo, an analyst with Jupiter Research. "But they are bringing more to the table today in terms of subscribers and their own content, so I think naturally there is some rebalancing going on. But I don't think it's a traumatic thing; just an evolution in the relationship with the Internet companies."

As more advertising dollars move online, broadband companies see a big opportunity. For the last couple of years online advertising has grown about 30 percent year over year, according to the advertising and marketing research firm eMarketer. The increase in spending comes as more advertisers shift away from placing ads in traditional media and spend more to advertise online.

But most of the advertising spending is concentrated among the top four Internet portals--Google, Yahoo, MSN and AOL--according to eMarketer. Google alone captured about 25 percent of the overall online advertising dollars spent in 2006. In 2007, eMarketer projects, two-thirds of the $19.5 billion expected to be spent online will go to those four big Internet companies.

"As more traditional advertisers shift their budgets toward online, they're more likely to spend that money on traditional online companies, such as Yahoo and MSN," said David Hallerman, senior analyst at eMarketer.

Still, the opportunity to make money from advertising is there, and broadband providers want a piece of the action. Comcast started experimenting with advertising on its portal about nine months ago, and the company is looking to expand its efforts. It already has a request for proposal circulating among Internet companies to find a suitable partner to help attract more advertising dollars.

What's in a portal?
Since cable operators and telephone companies first started selling high-speed Internet services, they wanted to offer more than just dumb pipes delivering access to the Internet. They wanted to provide a reason, beyond simple speeds and feeds, to keep customers loyal to their services. Developing a Web portal or home page for direct interaction, where they could showcase other services to existing customers, became an important element of their strategies.

"(ISPs) are bringing more to the table today in terms of subscribers and their own content, so I think naturally there is some rebalancing going on."
--Joe Laszlo
Jupiter Research analyst

Some companies, such as Comcast, built their own portals and partnered with big Internet companies like Google only for certain features, like search. Others, such as AT&T and Verizon Communications, partnered with existing giants to offer co-branded services that included premium content that users couldn't get on regular Web portal sites. AT&T, then SBC Communications, struck an exclusive deal with Yahoo. Verizon took a multipartner approach, signing contracts with AOL, MSN and Yahoo. Its co-branded AOL site will launch later this year.

At the time most of these deals were struck, companies like MSN and Yahoo had more clout with consumers when it came to the Internet than did phone companies or cable operators. As a result, some deals likely favored Internet players more than broadband providers.

That appears to be the case with AT&T and Yahoo, which struck their deal back in 2001. According to news reports, AT&T actually pays Yahoo to allow its subscribers to access Yahoo's content. Some estimates are that Yahoo makes as much as $250 million annually from the AT&T deal.

Meanwhile, Google has been paying some of its partners, such as Dell and News Corp., to use its search engine. Google has promised to pay $900 million in advertising revenue to News Corp. for putting its search engine on MySpace. Comcast is also getting paid to use Google's search engine, although some say Comcast wants a bigger cut of the advertising revenue.

See more CNET content tagged:
eMarketer, broadband provider, portal, Joe Laszlo, Comcast Corp.


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More money
Bottom line. ISP's want more money from the big four because most of us change our default start page to either google, yahoo, msn, or aol.
Posted by thedreaming (573 comments )
Reply Link Flag
Or Blank. (nt)
Posted by BubbleMemory (6 comments )
Link Flag
Or Blank. (nt)
Posted by BubbleMemory (6 comments )
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Black hula
I don't use them unless I need to.
Posted by paulsecic (298 comments )
Link Flag
I guess I just don't get it, having been on line for 12 years without one.
Posted by kayoub (7 comments )
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Darn ISPs
If I had a realistic choice, I'd be looking for an ISP that provided ONLY a highspeed "pipe"!
I am not interested in (=not willing to pay via my ISP invoice for) the "aggregated" content that they try to deliver.
There is such a plethora of sites out there today, most of them much better than the ISP's lame efforts, so I'd rather "customize" my experience, instead of being "force fed" something the ISP deem appropriate.

BTW, same goes for Cable TV. I'd request a "connection" and pay for that. But how and what I fill that connection with should be up to me (today I am paying $$$ for ESPN, the Golf Channel, etc, because I cannot "unselect" them.

There is likely a huge market in delivering good "technical" service, but totally unbundled from the content - at a lower monthly price than what we pay today.
Posted by euspos (190 comments )
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Consumers looking for sweeter deals
The broadband companies should concentrate more on lowering the sinfully profitable monthly rates they charge Americans. The rest of the conversation is nonsense - most people don't have the time or inclination to hang out on an opening page with tons of useless garbage and ad's on it. Google's got the right idea - a mean and clean opening page from which you directly sign into your gmail account. Honestly, I've basically "forgotten" who my broadband provider is because they provide absolutely nothing of value, except for access - their email server client is useless so I use their webmail and gmail (and Thunderbird for an email server client); their security suite is a joke so I use another security provider; etc.
Posted by i_made_this (302 comments )
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Broadband providers out for a major reshuffle with Tripleplay bundles
Here are excerpts from NY times article on the burgeoning demand and competition among High Speed Internet,Cable and Broadband providers in the US.
Hoping to see a healthy competition that leads to the most affordable services in the way Internet,Phone and Entertainment are coupled together in Triple play bundles.

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Posted by krissr (2 comments )
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