As the capital markets continue to punish the few listed Asian portals, the survivors will need to understand the fundamental economics behind portal profitability.

To date, losses abound in the portal space. With the exception of Yahoo! Japan and Yahoo-Kimo Taiwan, all listed Asian portals were unprofitable in 2000. These can be attributed to four key drivers of portal economics in Asia.

Firstly, scale drives profitability. There is a glut of portal offerings in all Asian markets, each fighting for the same small base of local users.

Secondly, localisation requirements drive up operating costs. Local market language and localised content are a must. These costs are non-trivial and are a key driver behind sustained losses among even leading Asian portals.

Thirdly, successful portals need a diversified revenue base. Too many Asian portals are overly dependent on increasingly scarce online advertising revenue. Survival will require increased revenue from e-commerce and from licensing internally developed technology platforms to other b2c web sites and intranets (b2b2c model).

Finally, customer segmentation and targeting will drive differential market returns. Retaining and deepening relationships with the most valuable affluent and e-commerce-ready customers is a necessary requirement for sustained profitability.

Conversely, the biggest opportunities in this market environment are for brick and mortar advertisers, particularly offline consumer goods companies. This may be the best time to negotiate sponsorships, advertising contracts and e-commerce partnerships with increasingly desperate Asian portals.