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Yahoo! Inc. fell 1.06 to 28.50 Friday following reports that Merrill Lynch analyst Henry Blodget said the company's new plan to start charging auction user fees will generate less revenue than he previously thought.
According to reports, Blodget lowered his estimate for the amount of money the fees will bring in this year from an original US$80 million, to $16 million to $30 million, and cut his estimate of the average revenue generated from each auction to 90 cents from $1.
Praise from Blodget and other analysts helped lift Yahoo! shares last Wednesday. U.S. Bancorp Piper Jaffray repeated a buy rating on Yahoo!, saying the announcement signifies the "start of monetization for a host of free Yahoo! services" and could add 5 cents per share to earnings in 2001.
Analysts say Yahoo! needs new sources of revenue to make up for a slump in the online advertising market.
Last Tuesday, Yahoo! said that beginning January 10th, it plans to start charging auction users listing fees ranging from 20 cents to $2.25. Fees will be assessed on a sliding scale and will be based on the starting and reserve prices of the items.
"We believe a nominal listing fee will ultimately further improve the
quality of our auctions service, thereby providing our buyers and sellers
with an even more compelling experience," Yahoo! Auctions senior producer
Brian Fitzgerald said in announcing the change. "Because we are not taking a
commission and the fee is minimal, we are increasing the quality of listings
while remaining price competitive and providing sellers with a better
margin."
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