December 30, 1998 10:45 AM PST

IDC predicts the Net landscape for 1999

Media companies that have been watching from the sidelines will finally make their move to invest in--or outright acquire--major Web portals in 1999, leaving the hyper-competitive industry controlled by a handful of behemoths, according to a new study.

Major consolidation in the portal space is market research firm International Data Corporation's top prediction about what the Internet landscape will be like next year.

Following on the heels of Disney's new stake in Infoseek and NBC's investment in Snap, media interest will culminate with Time Warner or CBS tapping Yahoo as a partner next year, the study forecast. (Snap is a joint venture between NBC and CNET: The Computer Network, publisher of News.com.)

"The reach of traditional media companies is way more than the reach of any of those Internet companies," said IDC analyst Frank Gens. "In terms of Yahoo, they want to be a media company that has reach beyond the Internet.

"Frankly, companies like AOL and Yahoo don't want to be screwed up by being managed by traditional companies," he added. "But those [media] companies bring a lot of marketing power with them, and are not completely clueless about the Internet."

Aside from media conglomerates, IDC predicted that other technology firms and even financial institutions will make Internet power plays of their own.

Software giant Microsoft, for example, likely will throw its weight behind a major portal, and Citigroup or Wells Fargo likely will acquire E*Trade, the report said.

IDC also predicted the possibility of three additional deals in 1999: Compaq Computer will sell off AltaVista, Infoseek will merge with Lycos, and NBC will purchase a greater stake in CNET and Snap.

The research firm's study said the coming year will witness the grounding of Internet stock valuations as a result of consolidation with brick-and-mortar companies. Wall Street's irrational exuberance over Internet stocks likely will be tempered next year as more "real world" companies buy into portals, and as the possibility of a recession continues to loom because of continued softness in global markets.



CNET Radio talks to IDC's Frank Gens
 
Nevertheless, the study predicted that rapid growth likely will be maintained in areas like PC penetration, e-commerce revenues, consumer adoption of technology, and Internet usage among women.

With PCs heading toward the $400 price point, many more homes will have them going forward--a key factor in the Internet's growth. IDC predicted that, by the end of next year, over half of all U.S. homes will have PCs.

"It's kind of a chicken and egg thing," said Gens. "The Internet is driving PC sales, but the fact that PCs are more affordable--that's the key" to home penetration.

IDC also expects e-commerce revenues to make great strides, reaching $68 billion next year--more than doubling this year's results. Households shopping online will reach 50 percent, the study said, while sites will begin hosting live sales using voice-enabling technology.

The demographics of Web users will change dramatically in 1999, according to IDC. The gender gap will for the first time favor women, who will surpass the 50 percent mark in the total Netizen population.

"The feminization of the Internet is a very important shift, because women seek out different Web destinations than men, spend less time surfing online, and are the primary decision-makers in the majority of household purchases," said IDC analyst Frank Gens.

Internet usage also will spread internationally, with more than 51 percent of all Internet users living outside the United States in 1999, the study predicted.

 

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