Market Bundling Strategies in the Horizontal Portal Industry

Abstract

The arrival of the Internet offers opportunities both for incremental efficiency gains and for complete industry redefinition, presenting new value propositions and hence leading to the emergence of new businesses and industries. One particular case is that of the horizontal portal industry, such portals being consistently the most visited sites on the Web. Nevertheless, despite ongoing market concentration, overall profitability remains low. In this paper we contend that, although the industry has great potential for value creation, value appropriation in these information-based businesses remains problematic and can be achieved only through cross-market bundling, that is, by selling the portal product packaged with Internet access and proprietary content through system competition. We support our claims with theoretical arguments and empirical evidence, analyzing the information distribution value chain in its entirety.