Internet portal raised the possibility that other types of retailers -- perhaps even banks -- could aspire to the same exalted status in the on-line pecking order.

Or did it?

Starbucks' stock lost 28% of its value the day after the announcement, as investors doubted that the coffee seller's physical presence could translate into a profitable, well-rounded access and information service on the World Wide Web.

Portals -- those high-profile Web locations that promise to steer consumers toward whatever their cyber-hearts desire -- have many bankers scratching their heads, wondering if or how they can get into this game. Today and for three more days, American Banker examines the portal phenomenon and how it may be affecting financial service providers and their strategies.

Some banks have rushed to become advertisers or more intimate marketing partners with the likes of Yahoo, Excite, and Lycos.

Others, sharing the Starbucks instinct, want to be portals in their own right, serving as entry points at least into the world of on-line finance and related money matters.

Many strategists eye Yahoo and its ilk with suspicion, fearing a new rival in the making for consumers'financial loyalties.

"Unless banks move fairly rapidly to leverage their position, consumers will gravitate toward whoever will provide them with convenience," said William Melton, the chairman and chief executive officer of Cybercash Inc. "Banks will wake up in three years and realize their financial data are in the hands of the Yahoos of this world."

As a director of America Online, the most popular interactive service and the acquirer of Netscape Communications Corp., which owns the Netcenter portal, Mr. Melton has an insider perspective.

To many on the outside, portals seem to embody an unpredictable, constantly changing set of priorities and permutations, mirroring the rampant and confusing complexity of the Internet itself.

Today's portals were conceived as search engines, helping people get to other Web sites.

The portal companies began developing or aggregating content in their own right, not only to make their sites attractive as starting places, but also to induce people to hang around longer and read the banner ads that are a primary source of portal income.

As their traffic has increased into the tens of millions, so has their appeal to financial institutions that want access to the proverbial eyeballs.

In July last year, four on-line brokers -- Ameritrade, Waterhouse Securities, DLJdirect, and E-Trade -- broke the sponsorship ice by paying America Online $25 million each for the right to be the service's premier brokers for two years.

Citibank followed a month later with a $30 million, multiyear agreement to be anchor tenant on Netscape's Netcenter.

More recently, it was one of four institutions to pay an undisclosed sum to offer financial services on Microsoft Corp.'s MoneyCentral.

In the slew of deals announced this summer, Bank of America and Telebank said they would make customer account information available through the Yahoo Finance and My Yahoo Web sites.

Royal Bank of Canada took a different tack by taking a 20% stake in AOL Canada and committing $7.5 million to interactive marketing programs that would include co-branding and bundling with AOL's various electronic commerce services.

Bank One Corp. has been the most prolific of the portal dealmakers.

Its First USA credit card division is paying Microsoft Network and America Online $90 million and up to $500 million, respectively, for five-year credit card marketing rights.

Its WingspanBank.com Internet bank signed a multiyear cobranding agreement last month with Lycos Inc., worth up to $135 million. Bank One itself is paying Excite Home Inc. up to $125 million to be the exclusive banking center at the Excite site.

Banks are expected to make more of the deals.

Fifty-five percent of 42 financial firms recently surveyed by Forrester Research in Cambridge, Mass., said they already had a distribution relationship with a portal that went beyond banner ads.

Ninety-five percent said they wanted to have more such agreements.

Some observers question the value of the deals, saying money does not necessarily buy supremacy on the wide-open Web.

As a method of adding new customers, "portal deals are difficult to justify," said Bill Doyle, research director of on-line financial services at Forrester Research.

Pay-for-performance deals, in which banks' payment for portals is based on the number of new accounts opened, are a smarter version of the "shakedowns" that occur when payments are outright, he said.

He pointed out that the four brokers with AOL would each have to acquire 100,000 new customers (given an average acquisition cost of $250 per account) to cover the costs of their deals.

Portals are getting "unrealistically high premiums" for their advertising space, Mr. Doyle said.

"It's not at all clear how the economics of portals will work," said Diogo Teixeira, the president of Tower Group in Needham, Mass. Given their dependence on banner ads and the public's potential to resist such ads -- fewer than 1% of customers click on them -- "portals may not survive at all," he said.

"Portals are dead," said Kenneth L. Tepper, the president and chief executive officer of the Internet bank USABanc.com in Philadelphia. Sophisticated Web users find ways around portals, he said.

Mr. Tepper has built a banking site that has lots of content besides banking.

"We'd like people to wake up and have USABanc.com come up first thing," he said.

The site offers features like news, the ability to listen to compact discs and then click to Amazon.com to buy them, and links to movie sites.

The bank is also contemplating simulcasting rock concerts.

"We're looking to create a place where people like to come," Mr. Tepper said. "If we provide what Yahoo does, then you don't need a portal anymore."

To be their own portals or substitutes, banks would have to augment the account information they provide with services such as electronic mail, news, sports, weather, community information, and free Internet access.

Wrapping one's own finances "around all the functionality the Internet currently offers could make financial institutions a natural starting point for on-line consumers," said Robert J. Martin, an Internet analyst at Friedman, Billings, Ramsey & Co.

Scott Appleby, principal at BancBoston Robertson Stephens, said, "Companies that have the transactions near and dear to consumers can become the portals."

Banks and portals are following two routes to the same end, Mr. Martin pointed out. Banks have been adding transaction services to their Web sites, while portals have been loading up on content.

Now the "more progressive" banks are seeking to add content as the portals turn their attention toward transaction services.

Though generic portals have made greater gains in attracting Internet users, banks have the advantage of already owning vast amounts of data on their customers' transactions. "Their ability to package that information and leverage it is formidable," Mr. Martin said.

In one of the bolder attempts so far, Bank One's WingspanBank.com already offers travel services and has intentions of expanding more broadly, he said.

Citibank is expected to take a big leap in that direction when it announces a new Internet bank offering, Mr. Martin said.

It is working on the rollout with Atlanta-based Security First Technologies Corp., which has long advocated banks' playing the role of portals.

"To us, it's the financial institutions' game to lose," said James S. "Chip" Mahan, the chief executive officer of the technology company known as S1. "What if a big bank offered unlimited Internet access and 12 months of free trades for a checking account? Wouldn't you do it?"

Banks' deep knowledge of their customers may position them well for the latest portal evolution, which incorporates "the phenomenon of intentions," as Toni C. Langlinais, a partner at Andersen Consulting, puts it.

A good example is providing not just a mortgage, but everything a consumer would need to move from one city to another, from information about schools to reservations for a moving van.

Organizations providing such comprehensive services are really "trusted agents," Ms. Langlinais said, a role that requires building "a network of partners to fulfill customers' needs, regardless of what industry" those partners may be in, she said.

Banks may well have a role in these "intention value networks," either as aggregators of the services or as partners, among many others, she said.

Even as banks move to become more like portals, few observers believe the established gateways loom as a large threat to the industry.

Joel Friedman, head of worldwide banking and capital markets consulting for Andersen Consulting, said at a recent American Bankers Association conference that Yahoo is still "a search engine masquerading as a portal," commanding high advertising rates because it happens to be where the most eyeballs go today.

"Banks are overreacting to portals," said Mr. Doyle of Forrester. There is no reason to fear portals' becoming banks, he said.

They would have to subject themselves to low margins and heavy regulation, which technology companies usually want to steer clear of.

"Portals are real estate that the banks choose," said Blaise Heltai, executive vice president of Fleet Financial Group in Boston. "Primarily, they are not a threat."

One sensitive area the portals are broaching is electronic bill presentment and payment. "The portals would love to have EBPP on their sites," said Moritz Schlenzig, a partner with Mitchell Madison Group in San Francisco.

No major announcements along these lines have been made. However, rumors of an agreement between Yahoo and Checkfree Holdings Corp., a major provider of bill payment and presentment services, have been cooking for some time.

"It will happen," said David C. Stewart, vice president of Global Concepts Inc. of Norcross, Ga., referring to the inevitability of portals offering electronic billing services.

When the time comes, Mr. Schlenzig said, the portals will no doubt strike deals with aggregators such as Checkfree or Transpoint, a joint effort of Microsoft Corp., First Data Corp., and Citigroup, leaving banks out of the loop. Recently, Chase Manhattan Corp., First Union Corp., and Wells Fargo Corp. formed The Exchange in an attempt to provide a bank-run alternative to the incumbent aggregators.

Banks should worry about a major competitor "striking a sweetheart deal with a portal," Mr. Doyle said.

Such combinations would produce national on-line financial service centers with lots of clout and customer bases in the millions.

John Hagel 3d, a McKinsey & Co. consultant in Silicon Valley and co-author of "Net Worth," an influential book on how the consumer calls the shots in the emerging information-based economy, has hypothetically but scarily proposed the formation of a "Triple-A Alliance."

Consisting of America Online, American Express Co., and the data base company Acxiom, the alliance could blend the necessary entrepreneurial drive, eyeball aggregation, content, services, and market data to pose a significant threat to much of the on-line financial world, Mr. Hagel suggested.

A mega-portal might have enough clout to dictate the terms of competition to small and medium-sized banks, some observers warn.

Larger portals might seek out regional banks that could offer deposit services in certain geographic areas through physical branches, said Carl Rush, a Cleveland-based consultant who formerly worked at National City Bank.

"The portals would turn these banks into subservient creatures," Mr. Rush said. "Banks would end up being low-cost service providers."

Mr. Doyle sees less of a hazard, saying smaller banks hopping on big portals face no more of a risk than they might by renting automated teller machine space from Citibank.

"Citibank would be prevented from looking at the other bank's data or acting on what it learned about its customers," he said.

Mr. Doyle noted that only 15% to 20% of Web traffic goes through portals.

"That's a lot of other traffic going somewhere else," he said. "The portals aren't the only game in town."

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