BROADBAND WILL SQUEEZE EUROPE'S GENERALIST PORTALS AS MEDIA PRODUCERS GRAB
CUSTOMERS AND REVENUES, FORRESTER WARNS


**To Survive Portals Must Reinvent, Playing To Their Individual Strengths**


AMSTERDAM, Netherlands, December 4 2001 . . . Broadband will accelerate the
collapse of the generalist portal business model and provide a weapon for
content producers to capture consumer revenues, according to a new report
by Forrester Research B.V. (Nasdaq: FORR).

"Portals mistakenly think they can dominate broadband, but they already
face erosion of value in the narrowband world as marketers divert their
spend to alternate venues and tenured consumer bypass portals," said
Forrester Associate Analyst, Hellen K. Omwando. "Content producers won't
need portals because they own the content, have access to entertainment
gateways, and the loyalty of huge multichannel audiences, and as killer
apps like VOD and PVRs mature, the main broadband entertainment gateways
will develop outside the PC environment. Equally, platform owners will
develop prime content for their own walled gardens and lock out low-margin
distribution through Web-based portals.

"The broadband-induced power shift will damage any portal's profit outlook,
and portals will fail to make broadband pay even by 2005 because of high
bandwidth costs and disappointing returns from key revenue sources like
rich media ads. Overall, the high variable costs of offering broadband
content, and operator's reluctance to lower bandwidth costs will hit US
invaders MSN, AOL, and Yahoo! hardest because they don't own a delivery
network."

Forrester asserts that European consumers will pay for certain types of
broadband content, and estimates that adult content, streaming audio/video,
and online gaming will generate total revenues of 5 billion euros by 2005 ?
almost a hundred times as much as today. The bulk of this will end up with
content producers and vertical entertainment sites. Adult content sites
will grab 79% of total paid-for broadband content this year, a share that
will drop to 17% in 2005 as streaming content takes off. But most portals
tiptoe around adult content for fear of alienating their prime audience,
and by doing so, they will only capture 65 million euros, leaving 744
million euros to independent adult sites. Equally, streaming content will
lack mass appeal until 2004 when bandwidth constrains will ease, and
bundled services ? Internet access plus content ? won't take off until
2004.

"Portals face a Catch-22 scenario; they must provide broadband content to
stay attractive but operate it at a loss," Omwando added. "To survive,
Europe's portals must adapt to one of four business models that blend
narrowband and broadband use. Conglomerates like AOL Time Warner and Terra
Lycos own both successful portals and rich content, and the power shift
will not affect their overall financial performance. But to keep their
position in the broadband world, they will enrich their content by buying
small but premium content producers in local markets running each service
as a separate business, raising the bar on quality entertainment, providing
ad-free online media consumption and getting revenues from hybrid
offerings.

"Portals lacking the money to own content will specialize and become
dedicated marketing partners serving ads across channels including
competitor sites. Using its client base and behavior tracking skills, a
portal like Yahoo! could become such a beast. As a cushion to the cyclical
nature of advertising, we believe that Yahoo! Inc. will sell 50% of its
stake in Yahoo! Europe to Vivendi Universal, and with this acquisition the
French conglomerate will become the top Pan-European value-chain owner,
benefiting from the portal's marketing savvy. MSN, Wanadoo and T-Online
will use their strong technological backing to succeed as tools-based
providers that offer P2P communication applications, seek expansion in the
SME market, and make money from service fees. Finally, Europe's small local
portals will subsist by providing personalized, location-based services --
a far cry from their generalist offerings of today."

For the report "Portal's Broadband Facelift," Forrester spoke with 30
broadcasters and entertainment and news publishers across Europe about
their broadband plans and future relationship with portals, in addition to
26 portals, technology vendors, and marketing service firms across Europe.