interactive.wsj.com
April 3, 2001
With Ad Sales Down, Yahoo!
Gambles on Fees for Quotes
By PETER EDMONSTON
WSJ.COM
Yahoo! Inc., betting that online investors will be willing to pay for
up-to-the-minute information about their portfolios, Monday introduced a
real-time, stock-quote service for a monthly fee of $9.95.
The move reflects Yahoo's strategy of
introducing new services, rather than
slapping fees on old ones, to test Internet
users' traditional resistance to paying for
services on the Net. But Yahoo will have to convince customers that its
new service is superior to what many online brokerages and financial Web
sites provide free of charge, analysts say.
Called Yahoo Finance's Real-Time Package, the news service includes a
browser-based application called MarketTracker that flashes an unlimited
number of constantly updated stock quotes and news from several sources
on subscribers' computer screen. Yahoo calls it a significant step up from
the 15- to 20-minute delay that comes with its own and many online
stock-quote services.
Tim Sheehan, director of production for Yahoo Finance, said the new
service goes well beyond simply providing real-time quotes, allowing users
to get fresh prices and news for all the stocks in their portfolio, all of which
can be sent to a PC, a pager or a Web-enabled mobile phone. These
features make for a "combination punch" that "easily justifies the
subscription fee," Mr. Sheehan says.
To hook subscribers, however, Yahoo
Finance will have to justify the value of the
new bells and whistles. Real-time quotes are
available for free from other financial portals,
including Microsoft Corp.'s MSN
MoneyCentral, which offers as many as 50
such quotes each day for no charge. Netscape.com, a portal owned by
media giant AOL Time Warner Inc., offers unlimited free real-time quotes.
Meanwhile, real-time quotes have become de rigueur at the major online
brokerages, says Dan Burke, a senior analyst for Gomez Inc. of Waltham,
Mass. Mr. Burke says he expects Yahoo will have a hard time selling
online investors on the idea of paying for stock quotes. "Our research
shows that investors are quite averse to paying for anything," he says. "That
doesn't bode well for Yahoo."
Yahoo has warned twice this year that its earnings will be lower than
expected, most recently last month, when it said it will break even in the
first quarter after goodwill amortization and other items. That was well
below the five-cents-a-share estimate among analysts surveyed by
Thomson Financial/First Call. The company has blamed a shortfall of
online advertising, which accounted for 90% of Yahoo's revenue last year.
Meanwhile, Yahoo has vowed to wean itself from its dependence on ads
and emphasize its business-services unit and fee-based services. Yahoo's
finance portal, Yahoo Finance, is expected to be a key component of the
new strategy. Yahoo! won't disclose traffic figures for Yahoo Finance, but
the number of unique visitors to finance.yahoo.com -- which serves as the
main entry point to the site's various subdomains -- came to 5.1 million in
February, according to Internet-measurement firm Jupiter Media Metrix of
New York. That's up from 4.6 million a year earlier.
Yahoo Finance has already introducted two fee-bearing services. Yahoo
Bill Pay comes in two flavors: one plan allows users to make payments to a
select group of billing partners for no charge; the other, allowing payments
to anyone, costs $4.95 a month for the first 12 payments. Each additional
payment after that is 40 cents. Yahoo's tax-filing service costs $19.95, or
$99.95 when returns are reviewed by a tax preparer at H&R Block.
It makes sense for Yahoo to look to the financial sphere for additional
revenue sources, says Rob Martin, an Internet analyst at Friedman,
Billings, Ramsey & Co. of Arlington, Va. "Financial content was some of
the first stuff to be offered up for subscription on the Web," he says,
mentioning TheStreet.com Inc., which had tried to charge an annual
subscription fee, and WSJ.com, which continues to charge for its content.
Yahoo's incremental approach to fees means coming up with new,
"premium" services, rather than attaching fees to existing services now
offered free, Mr. Martin says. "There's a lot of consumer psychology
involved in this," he says.
Still, the widespread availability of real-time quotes from online brokerages
could be a barrier, Mr. Martin says. Virtually all online brokers offer some
form of real-time quotes to registered clients. "That's definitely a reason
why a person might not try it. But maybe people will want the convenience
of consolidating all of their data in one place," he says.
Yahoo's new stock-quote service isn't likely to satisfy the most hyperactive
online investors, who typically crave a wide montage of pricing data drawn
from various market makers and electronic communications networks -- a
service commonly known as Nasdaq Level 2. Level 1 quotes, such as
those offered by Yahoo, MSN MoneyCentral and others, are a pared
down version that include the highest bid and the lowest ask price. But in a
nod to active traders, Yahoo last month began offering real-time pricing on
a select group of stocks from several ECNs.
Yahoo's Mr. Sheehan also suggests that there is a healthy number of online
investors who are interested enough in the market's ups and downs to pay
for real-time quotes. "This package goes beyond active traders to appeal
to the much broader audience of people who are actively monitoring their
portfolio throughout the day," he says. Mr. Sheehan won't estimate how
many users he expects to sign up for the real-time package, but says the
potential audience is large.
Yahoo has tried to established fee-based services elsewhere on its site. In
January, the company began charging a nominal fee to run listings in its
Web-based auctions. The company also offers a premium upgrade to its
free e-mail service, allowing for more disk space to store messages and
offering mail-filtering software.
Write to Peter Edmonston at peter.edmonston@wsj.com
KJC |
