Financiers aim for portals.

Portal websites, the Internet gateways that provide sites focusing on specific areas, have become popular advertising channels for financial services providers.

When three leading Internet brokerages signed two-year marketing agreements with America Online (AOL) last year, a new trend

in financial services advertising seemed to be emerging. The combined value of the deals was $75 million. The brokerages - E*Trade, the number 2 online broker; Donaldson Lufkin & Jenrette's DLJDirect and Toronto Dominion Bank's Waterhouse Securities - each agreed to pay $12.5 million per year to be displayed on AOL's personal finance channel and its new brokerage and mutual fund centres.

Other deals by banks followed last year. In August, Citibank, which had previously agreed to an e-commerce systems' deal with Netscape, announced that it would become the anchor tenant on the planned finance channel on the browser company's Netcenter website - one of the busiest portal sites. Few financial terms were revealed but the companies called it the largest online personal finance deal ever. Citibank said it hoped that the deal would assist it in becoming a "mass market consumer brand".

In November, Bank One the fifth-largest bank in the US, made an agreement with Excite to develop a full-service financial centre for Excite users. The parties say that, with performance incentives, the agreement has the potential to be worth more than $125 million to Excite and it gives Bank One exclusive rights to market its products and services on Excite's home page at www.excite.com.

"This comprehensive agreement [with Excite] will help unleash the power of personalized online banking for consumers across the nation, accelerating the growth of this exciting channel," said Bank One Retail Group chairman Kenneth T. Stevens. Bank One had previously announced $90 million in advertising commitments to Microsoft's MSN website.

The Bank One/Excite financial centre will offer personalized banking information accessible through the home page of Excite. When Excite users log into their Bank One account, they will receive instantly updated personalized information. Excite users will be able to open - confidentially - checking and savings accounts, obtain credit cards, get a home equity or car loan or mortgage, buy insurance, invest, and even receive and pay bills.

"Users who begin their day at their personalized front page at Excite will be able, through Bank One, to address nearly all their banking needs on the Internet," said Stevens. "Moreover, Excite's personalized start page reinforces Bank One's goal to become the most personal big bank in the country," he added.

It is interesting to observe that Stevens' background is not in banking but in fast-food giant Taco Bell while Edward Horowitz, the driving force of Citibank's strategy, previously worked at Viacom, the entertainment company.

Bruce Luecke, president of Bank One's interactive unit, has commented that banks have traditionally viewed new technology as a means of reducing costs while Bank One views its business as retailing and, as it expands beyond its regional base, it has a strategy to use the Internet to exploit its strength in specific areas such as credit cards rather than providing full checking account services.

Bank One also has a position on the Destination E*Trade website (www.etrade.com), which is ranked as the best financial service site on the Internet in the recently launched Lafferty Internet Ratings(*). E*Trade, the Number 2 online broker, plans to develop its site as a financial portal and, in addition to its core stock trading business, is targeting online financial consumers with product offerings ranging from mortgages to insurances.

E*Trade, which had 544,000 active accounts at the end of September 1998 - more than double the year earlier - has stated its intention to embark 'on a $100-million-plus integrated targeted marketing campaign intended to establish E*Trade as a premier global brand for the next century'.

According to E*Trade Group president and chief executive Christos M. Cotsakos: "The company made the strategic decision to increase its investments in marketing and technology at the end of the quarter [September 1998] with the objective of better positioning itself as one of the leading Internet financial services brands of the 21st century."

E*Trade's strategy is to provide extensive free content, including real-time quotes, to noncustomers who, through use of the website, would likely become stock trading customers or purchasers of the other financial services. It provides a marketing platform for these services, similar to the main portal sites, and earns income through generating business for the providers.

Apart from the Bank One platform, it currently offers the following services:

* The Mortgage Center is a platform for E-Loan's services (www.eloan.com) which enable E*Trade visitors to get comprehensive information on mortgages, shop for the best deal and apply for a loan, compare the lowest rates available on a daily basis, and get unbiased recommendations for the best loan to match financial needs;

* The E*Trade Visa card is offered through a tie-up with First USA;

* The Insurance Center is a platform for the InsWeb (www.insweb.com) online insurance services, including instant multiple insurance quotes which have been give a Number 1 ranking in the Lafferty Internet Ratings review of global insurance websites.

While the cost of a position on a prominent Internet portal site rules out all but the main market players, it is interesting to observe the relationship between brand and customer acquisition cost among the leading online brokers.

According to the US investment bank Piper Jaffray, Charles Schwab, the Number 1 online broker, spent 15 percent of revenues on advertising in its recently ended fiscal year while E*Trade and Ameritrade spent 25 percent and 32 percent respectively. Schwab's customer acquisition costs since December 1996 have been relatively steady (see graph).

* Lafferty Internet Ratings - Benchmarking Web-based Financial Services

Tel: (353-1) 671 8022 or e-mail cuserv@lafferty.ie