American-headquartered internet portals are in danger of losing ground in Europe after focusing on cost-cutting rather than expansion, believes Christian Mohn, chief executive of Lycos Europe, jointly owned by European-based Terra Lycos and Bertelsmann.

“The American companies are substantially underspending Europeans. Even companies such as AOL are not gaining market share, while Yahoo! Europe is not making any moves,” he declared. “AOL and Yahoo! have to look out that they don’t fall further behind. They are risking being second tier players. That was unthinkable a year ago.”

Illustrating his point, Mohn revealed that revenues at Lycos have overtaken those of Yahoo! Europe. In Q1, the former posted revenues of E41.6 million, compared to the latter’s E23m.

The one exception to this trend appears to be Microsoft, which has invested heavily in its MSN portal. Continued Mohn: “Microsoft [is] more aggressive and more of a threat than Yahoo! In terms of marketing spending they are the most aggressive company right now.”

Ironically, given Terra Lycos’s recent unveiling of a 100% paid-for business model [WAMN: 17-May-01], Mohn doubted whether charging for services would benefit portals. “I don’t think it will take off,” he said. “There is potential to charge for some very special, premium services, but I don’t think they will make a big contribution to portal revenues.”

However, Mohn also had some positive news for the online sector, revealing that there are signs in some parts of Europe – such as Denmark and Germany – of an upturn in internet advertising, despite poor overall growth.

News source: Financial Times