A series of customer surveys making their way onto Yahoo sites in recent weeks suggest the company is readying what may be its most serious effort yet to cut its dependence on advertising, although it's unclear whether Yahoo will actually launch any of the services.
Among other things, recent Yahoo surveys take the pulse of consumer demand for a Yahoo-branded high-speed Internet access service and a secure corporate instant-messaging service. As previously reported, the company also is testing the waters for paid Web-based office applications.
A Yahoo representative would not comment on the surveys or whether the company will enter any of the new businesses suggested by the surveys.
"We pride ourselves on conducting extensive research on various targets, whether they prove to be future services or not," the representative said. "We field numerous surveys to gather and analyse the interests of our users."
But with the company's shares down 90 percent from their 52-week high, it's investors, not just customers, who are commanding Yahoo's attention.
Corporate and premium consumer services have been a rallying cry for the Web portal since late last year, when it became clear that the Internet economy was headed for a meltdown. But nearly six months into the reign of Chief Executive Terry Semel, Yahoo has made little progress in weaning itself from advertisers. As of its last earnings call, the company said it expects 80 percent of its revenue to come from advertising, as opposed to about 85 percent in 2000.
The decline in online advertising spending has forced Yahoo to cut revenue forecasts in half since the beginning of the year, from more than US$1.4 billion to between $700 million and $775 million--an outlook that may be reduced further when the company issues third-quarter earnings results later this month.
Even with the prospects of new services on the horizon, analysts said Yahoo faces a difficult task in selling them to paying customers, a resource that has been scarce to date online.
"Yahoo's motives here are pretty clear," said Mark Mooradian, an analyst at Jupiter Media Metrix. "They're continuing to try to diversify revenues away from advertising. But I think consumers, especially in these trying times, are not going to warm up to subscriptions overnight unless the offering is truly compelling."
Hints that Yahoo is considering entering the high-speed Internet access business came last week, when the company began promoting consumer surveys on its site. One of the surveys asks a series of questions to determine people's appetite for paying for Web-based services that were otherwise free. Then, in a series of questions about people's Internet connection speed, the survey asked what services people would prefer for high-speed access at home. The options included America Online, cable companies, local telephone providers, Microsoft's MSN and Yahoo (if offered as an Internet service).
In a separate survey, readers were told to assume that Yahoo has a version of its IM service for internal use in small and midsize businesses. Dubbed the "secure" version of Yahoo Messenger, the proposed service would include secure login, encrypted messaging and peer-to-peer messaging. The survey then asked whether people would "be willing to pay for such a 'secure' Messenger."
Although there is no assurance that Yahoo will enter the high-speed Internet access business or create a for-pay IM service, research aimed at gauging the potential of both could signal a considerable change in the Web portal's strategy.
Yahoo has long downplayed any desire to own an Internet service provider and has never made significant inroads in co-marketing partnerships with other ISPs. The company has always maintained its stance of keeping instant messaging free and has never publicly considered offering a corporate version of the service.
Yahoo executives and outside observers have long debated whether the company needs to run its own Internet access business.
The company has watched as competitor Excite.com sold its business to high-speed cable ISP @Home; America Online acquired Time Warner, which owns the second-largest cable network; and Lycos sold itself to Spanish ISP Terra Networks.
The results have been a mixed bag. Excite@Home has filed for bankruptcy, and Terra Lycos continues to struggle. Meanwhile, AOL Time Warner has begun to launch its AOL cable ISP.
Yahoo has already tried, unsuccessfully, to break into the online access business. It first signed up with MCI in 1998 to offer Yahoo Online. When MCI was acquired by WorldCom later that year, Yahoo switched its provider to AT&T's WorldNet access service, charging $14.95 a month for limited dial-up access.
A WorldNet representative said the Yahoo deal ended more than a year ago and that a relationship no longer exists between the two companies. AT&T WorldNet still has a co-branded dial-up service, but it does not yet offer a broadband option. The company is looking at providing a DSL (digital subscriber line) service with the network it inherited from NorthPoint Communications, however. AT&T Broadband, a separate division, is expanding its cable modem network by acquiring Excite@Home's assets in a bankruptcy proceeding.
Although partnerships such as that between Yahoo and AT&T promise a relatively cheap and simple way to reap marketing fees, they are rarely hassle-free. Customer service, for example, can become a significant complication for both sides.
Yahoo continues to offer a branded online access service to its subscribers in Ireland and the United Kingdom, according to its Web site.
But some analysts think the environment is ripe for Yahoo to get into the access business. At a time when advertising continues to slump, the company needs a boost in recurring revenue. As AOL Time Warner can attest, selling subscriptions provides a safety net for media companies in the event of a down advertising market.
