Yahoo denies Reuters Instinet talks
But analysts say portals want online trading business
By Bambi Francisco, CBS MarketWatch
Internet Daily
NEW YORK (CBS.MW) -- Yahoo denied it's in talks with Reuters Group PLC to give Yahoo users access to the Reuters-owned Instinet electronic brokerage unit, although analysts said Web portals are increasingly looking for ways to attract cyber-trading customers.
The London Sunday Times reported that Reuters was in talks with Yahoo (YHOO: news, msgs) on a deal that could close by the end of this year.
The report is "purely rumor," said Diane Hunt, a Yahoo spokeswoman. Reuters officials, however, confirmed to CBS.MarketWatch.com that they were looking at options in online retail brokering and at the prospect of working with "another partner." Last week, MarketWatch reported that Instinet was considering an aggressive push onto the Web. See full story.
Coupled with other Yahoo initiatives announced Monday, the idea thet Yahoo would bring more financial services to its 60 million unique users gave the stock a nice kick. Yahoo (YHOO: news, msgs) shot up 9 9/16, or 6.6 percent, to 154. Reuters (RTRSY: news, msgs) rose 3 1/2, or 4.2 percent, to 86 5/8.
A step in a new direction
"If Yahoo could indeed get access to Instinet's services, this is another piece of content they can market to their suscriber base," said Allen Weiner, an analyst at NetRatings.
"It would also lure an entirely new online investing segment to Yahoo," Weiner added, referring to higher-end investors as well as smaller online traders.
"It sounds like a step in the online brokerage business for Yahoo," said Dalton Chandler, an Internet analyst at Needham & Co., when told about the report of a possible alliance. "It may be that Yahoo wants to be the front end for Instinet trading, and it's another way for them to monetize their traffic."
The online brokerage model could be the most successful business model on the Internet, said Sean Chin, an Internet analyst at Merrill Lynch, explaining that, as consumers increasingly take control of their finances, more financial and e-brokering services will be in demand.
In a recent note to clients, Bill Burnham, an Internet analyst at Credit Suisse First Boston, hinted that general portals may want to take advantage of the attractiveness of an online trading customer.
Pupil envy
"The highly attractive financial aspects of online trading have not gone unnoticed by Internet firms outside the online trading industry. Many of these firms look at these high returns with envy," Burnham said.
Burnham went on to say that the interest is "piqued when these outsiders see that online trading firms have very strong relationships with their customers."
Indeed, according to NielsenNetRatings, online trading customers spend an average of 36 minutes online a day vs. 25 minutes for portal users. Higher usage should translate into greater overall usage of their entire site, a prospect "particularly compelling to the generalized portals," Burnham said.
Yahoo already has relationships with online brokers through its premier merchant program, including Ameritrade (AMTD: news, msgs) and E-Trade (EGRP: news, msgs). Yahoo receives a fixed fee from its premier merchants for placement on Yahoo and a transaction fee from customers that it refers to the online brokers. Yahoo does not break out the revenues from such alliances.
The growth in online investing is also quite attractive. The number of online brokerage accounts is expected to explode to 25 million by 2002, up from 6.7 million accounts in '95, according to market research firm IDC.
|
