The Economist writes about how Microsoft, Yahoo and Google are fighting over AOL:
Lest anybody pick the wrong metaphor, it is not the case that AOL is the prettiest girl at the dance, says Safa Rashtchy, an analyst at Piper Jaffray, a bank. Instead, he says, AOL is big open real estate and you don’t want your competitor to get it. That is because the vaguely defined and fast-changing web-portal industry, though still young enough to be the fastest-growing advertising medium, is also showing the early signs of maturity. That would suggest that this industry, like many others, will evolve towards three large generalist players and several small niche firms, a phenomenon that Jagdish Sheth and Rajendra Sisodia, two academics, call the rule of three in a book of the same title. The big question is which three emerge and in what combination.
Ultimately, it all comes down to the three suitors’ estimates of what Mr Varian calls the power of the default. Default users are the great unwashed, says Mr Varian. They are the ones who, for instance, use MSN because it comes pre-installed in Internet Explorer, the web browser that itself comes pre-installed on new computers. By contrast, teenagers and geeks mix and match their web mail, IM, online maps, search, blogging and so on from whichever service on the internet they happen to like best. Default users are less demanding, older but nonetheless rich enough to target with small hyperlinked text advertisements. For the dealmakers, it all comes down to figuring out how much these naifs, collectively, are worth.