A couple of weeks ago, a reader suggested I write a column that railed against Yahoo!'s recent decision to change the way it exposes users of its free e-mail service to online marketing offers.
Previously, users could choose whether they wanted to receive e-mail marketing pitches from Yahoo! partners. Now all e-mail accounts have been set to accept those offers by default, and users must manually reset their preferences to avoid the advertising come-ons. "You have to actually go in and change it," the reader said. "What a [expletive] thing. If it wasn't free I'd cancel it."
Interesting, I thought, but not meaty enough for an entire column. But then I started reading, in quick succession, more announcements about changes in Yahoo! (YHOO: Research, Estimates) services.
In the past month, it seems that a week hasn't gone by that Yahoo! didn't start charging for a formerly free offering. After the announcement about marketing preferences, the company started charging users $29.99 per year to forward their Yahoo! e-mail to another account. Then it announced it would charge $1.99 per minute for technical support. Want extra photo or data storage on Yahoo!? Fork over some cash. Same thing with joining an online gaming network on the site.
Some consumers will never accept being asked to pay for things online. But there's a difference between accepting the fact that companies need to make money and suddenly being bombarded with charges. If I were an active gamer with a Yahoo! e-mail account forwarded to my work address and my graphics files housed on Yahoo!'s Web storage center, I would suddenly be looking at almost $50 in charges.
Going from free to $50 in less than a month is pretty quick turnaround, and it's likely to cause some customers to flee rather than face the fees.
Before any of these new fee announcements were released, I wrote that I was warming to Yahoo!, that its announced plans for revenue diversification would guide it out of the advertising recession, and that CEO Terry Semel's goal of reducing advertising sales to 50 percent of Yahoo!'s total revenue was possible. I still think that's true, and these latest moves are all part of the plan.
But in the business world, a plan -- especially one as radical as introducing fees for services that had been free for years -- is only as good as its execution. And I'm not convinced that Yahoo! is executing it as well as it could.
"Yahoo! has to be careful," says John Corcoran, an analyst at CIBC World Markets. "They're turning up the heat a little bit. I don't think they're moving too fast, but consumers will be the ultimate arbiters of that." Corcoran, who last month became a Yahoo! bull for the first time, still maintains his "buy" rating on the stock.
"In the longer term, we're going to see more fee announcements," says Jeetil Patel, a senior analyst at Deutsche Banc Alex. Brown. "Will Yahoo! search be a service you have to pay for? No. But you'll have to pay for premium services."
In its zeal to show Wall Street that it can make money that doesn't come from Madison Avenue, I think Yahoo! is moving a little too fast. Yahoo! sees the light at the end of the tunnel in the form of broadening revenue, but let's hope the company realizes it's a marathon, not a sprint. Consumers shouldn't get trampled in the process.
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