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May 11, 2001

Jupiter Media Metrix reports that the total number of companies controlling 50 percent of US user minutes online shrank 64 percent, from 11 to four, between March 1999 and March 2001. Even more drastic was the drop in the number of companies controlling 60 percent of all US minutes spent online: from 110 in March 1999 to 14 in March 2001, an 87 percent decrease.

"The Media Metrix data show an irrefutable trend toward online media consolidation and indicate that the playing field is anything but even," said Aram Sinnreich, Jupiter senior analyst. "The Internet may provide an opportunity for new players such as Microsoft or Yahoo! to become serious media companies, but so far a major share of the market is being absorbed by a handful of companies, with those same companies continuing to direct traffic across their own networks of sites. Media companies competing for the attention of consumers must consider that while the key barrier to online entry and success used to be infrastructure, it has shifted dramatically to advertising and marketing."

According to Jupiter analysts, three key factors are driving online media consolidation:

First, mergers and acquisitions have turned already powerful companies into even more powerful media behemoths. For example, in March 1999 AOL and Time Warner were both among the 11 companies controlling 50 percent of all user minutes - ranked number one and 11, respectively. Today, AOL Time Warner, the product of their merger, is ranked number one.

Second, major media companies have significantly increased their ability to differentiate online offerings through quality of presentation, intensity of marketing and integration with off-line programming. As the toolset for online programming has improved and budgets for Internet projects have climbed at traditional media companies, the quality gap between Internet-only offerings and those of their established off-line competitors has broadened.

Lastly, economies of scale apply to online businesses as much as they do to off-line. As funding and stockholder patience have evaporated over the last year, online businesses without self-sustaining revenue models or potential cost-savings for their parent companies have spiraled toward extinction.

Click above on 'More Images' for charts.

For more information at http://www.jmm.com for more information.

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