Yahoo! No Longer Home of the Free

Does the decision by Internet giant Yahoo! to start charging its users auction listing fees mark the beginning of the end for free Internet services and content?

Starting Wednesday, Yahoo! began assessing fees of up to US$2.25 for auction listings, based on the starting and reserve prices of the items offered. The change is one of several steps Yahoo! is taking to find new revenue streams amid an ongoing nosedive in the online advertising market.

Soon, more and more Internet firms may follow suit and change the character of the Web from a place chock-full of free services to a pay-as-you-go shop. However, even as some dot-com content providers continue to fold and others struggle, the day that consumers will have to pay for news and information on a regular basis looks far off.

"In the long run, content pages are going to remain free and rely on advertising," IDC e-commerce analyst Jonathan Gaw told the E-Commerce Times. "The companies that will be able to offer free content will be the ones able to get the most eyeballs. It's a volume play."

No Free Auction Rides

Analysts reacted enthusiastically to Yahoo's decision on auction listing fees. According to U.S. Bancorp Piper Jaffray, the move signifies the "start of monetization for a host of free Yahoo! services" and could add 5 cents per share to earnings in 2001.

Likewise, Merrill Lynch analyst Henry Blodget was said to have praised the company's decision, saying it could add $30 million to $80 million, or 3 to 5 percent, to the company's 2001 revenue.

Furthermore, charging auction listing fees comes at relatively low risk. Even though the change at Yahoo! could drive some users over to rival online auctioneer eBay, Yahoo! auctions will still be cheaper than eBay. Unlike other auction sites, Yahoo! will not charge closing fees or take a percentage of an item's final price.

"Charging for auctions was the easiest thing for Yahoo! to start with, because eBay was already charging listing fees," Gaw said. "The Yahoo! auctions users who won't use the service because it's no longer free are not the high quality merchants Yahoo! wants to do business with anyway."

Pushing the Envelope

The more complicated question is how far Yahoo! will go in instituting charges on its site.

The portal already charges users for such "premium" features as paying bills online, extra e-mail storage and business services.

Additionally, co-founder Jerry Yang reportedly told investors in New York in December that in addition to charging for auction listings, the portal is going to develop other subscription-based features, such as an online music service.

The move toward subscription fees comes as the ranks of online advertisers have thinned and the competition for ad dollars has tightened. Yahoo!, which attracts more than 55 million users per month with free news, Web searches, stock quotes, and weather reports, depends on advertising for 90 percent of its revenue.

Fee-Based Free ISPs

Other businesses, particularly free Internet service providers (ISPs), are also changing their stripes and charging toward charges.

After Kmart-backed BlueLight.com purchased its free Internet service provider (ISP), it said it would continue to offer Web access for free. However, the company is now limiting the number of hours for free service to 25 hours a month per user.

Pure play free-ISP NetZero has announced a similar limit on the number of free hours it will offer.

In contrast, most content sites are stemming the pay-to-play tide. Despite their hardships, and even in the face of having to fold, these sites are not daring to ask their audience for money.

Contention over Content

Gaw said that because of the wealth of content sites on the Internet, only the most savvy will survive. The major sites such as Yahoo!, AOL and MSN will continue to offer free content because they have the traffic to support it, the analyst said.

However, while acknowledging that new services may come at a cost, Yang reportedly also told the investors in New York that his company might start charging for some content pages. That move would come at some risk, depending on the pages in question, because the online advertising market can pick and choose the content sites on which it wants to spend its dollars.

More than one free niche content site has seen hard times in recent months, with online financial news provider TheStreet.com, for example, cutting 20 percent of its U.S. jobs, closing its UK operation, and ending its joint venture with The New York Times. At a minimum, very few free-content sites focused on niche markets, such as investors or sports fans, will be around in a few years, according to Gaw.

"ESPN will be able to do it, but even SportsLine could not." Gaw commented. "If SportsLine integrates with an offline service or product they could, but if not, no."

Research Is King

The early years of the Web saw some attempts at charging for content, but for the most part, the world's ultimate resource tool blossomed with news, financial information, and sports statistics made available free of charge.

Even obscure topics -- such as the search for lost cities of the silk road and the question of whether humans actually have a sixth sense located in the Jacob's organ -- could be researched on the Internet in detail and without cost.

While researching news and information will likely remain a wallet-free exercise, the other services once enjoyed for free are probably gone with the wind.