YAHOO plots auctions comeback as it tries to regain Web profits

Wednesday, August 8th 2001, 12:00 am
By: News On 6

SUNNYVALE, Calif. (AP) _ Yahoo! Inc. boasts of having 200 million registered users, but it needs to find a lot more like Patty Himel.

Himel sells photographs and china over the Internet from her home in Houston. There are millions of Americans like her, but most hawk their wares on eBay Inc., the pioneer and runaway leader in online auctions.

``I only sell on Yahoo,'' Himel said. ``I have never entertained the idea of moving to eBay. I find Yahoo is much more user-friendly for buyers and sellers.''

As Yahoo tries to regain its status as one of the Internet's few consistently profitable companies, it's looking to auctions as a way to help.

The online giant has posted net losses in three straight quarters, and revenue is expected to fall from last year's $1.1 billion to about $730 million this year. Yahoo is looking for new ways of making money beyond advertising, but users have been lukewarm at best to its new subscription-based services.

Meanwhile, eBay expects almost the same amount of revenue as Yahoo in 2001 but generates what might be the Internet's fattest profit margins, because hosting auctions requires relatively little overhead.

That has not gone unnoticed at Yahoo, where several changes are under way as former Warner Bros. chief executive Terry Semel settles in as the new boss.

Though the company does not disclose financial figures or targets for its auction business, ``we understand that we really could impact the revenue of Yahoo over time,'' said Brian Fitzgerald, senior producer for Yahoo auctions.

Although its auctions plummeted 90 percent last winter after it began charging sellers to list items, Yahoo is rebuilding a little at a time and hoping to make the online auctions business competitive once again. Fitzgerald's group is trying to persuade more businesses to sell on the site while keeping individual sellers like Himel happy.

``Over the long haul here, we're actually very well positioned,'' Fitzgerald said. ``Auctions in general have caught like wildfire in the last four years, but in the big scheme of things, it's very much in its infancy.''

EBay chief executive Meg Whitman said her company has an advantage for several reasons, especially because it is obsessive about helping its users. But she isn't counting Yahoo out.

``Yahoo's a great company, a great brand, and there's an opportunity for them to take a piece of this business,'' she said in a recent interview. ``I think we need to keep our eye on them.''

Yahoo has a ways to go to catch up in auctions. It offered 3.3 million items for sale in the last quarter; eBay had 98 million. _ which ranked third behind eBay and Yahoo in Jupiter Media Metrix's most recent ranking of the consumer auction sites' viewership _ no longer prominently displays its auctions, though it claims to have 800,000 listings now. A spokeswoman said Amazon is focusing more on having various pricing formats, including auctions, in its virtual stores.

Yahoo once tried to buy eBay, but the talks fell apart. Its biggest auction news came in January, when it stopped letting people list items for free.

Yahoo requires between 20 cents and $2.20 to list an item, depending on its value; eBay takes 30 cents to $3.30. Yahoo doesn't charge commissions on sales; eBay collects 1.25 percent to 5 percent.

Now that the fees have removed much of the clutter from not-so-serious sellers, Yahoo's auction managers are reaching out to merchants that sell and advertise elsewhere on the site. They tout Yahoo's lower fees and say they can draw in those 200 million members with auction links on Yahoo's home page, in e-mails _ even on results generated by its search engine.

Yahoo sells large merchants like IBM Corp. entire pages to themselves _ which eBay also offers _ and aims to help smaller sellers like Himel by promoting items that sell particularly well.

Shmuel Gniwisch, chief executive of online jewelry merchant, said he considered opening up for business on eBay recently. But he decided Yahoo could better differentiate his items from those sold by amateurs. The head of Yahoo auctions' jewelry and watches category even flew to Montreal to personally see Gniwisch's merchandise.

``I put $1 million worth of inventory in front of him, and said, 'Let's create sections, let's create ways of how we're going to sell what,''' Gniwisch said. ``Their support is unbelievable.''

Yahoo's challenge, however, will not be finding sellers, but finding buyers. While all of eBay's 34 million users have signed up specifically to buy or sell things, many people log on to Yahoo just to check their e-mail or read the news.

Consequently, analysts believe slightly more than half of eBay's listed products actually sell; Yahoo says its ``sell-through'' rate is about 31 percent _ up from 10 percent before the listing fees started.

Internet analyst Jeetil Patel of Deutsche Bank Alex. Brown said Yahoo has done a good job of trumpeting its auctions on its home pages and search results. But he believes Yahoo needs to better integrate its auction listings with the rest of its shopping pages, since consumers tend to search for certain products or brands more than they search for certain pricing formats.

``They're not going to be the leading site,'' said Jared Blank, an auction analyst at Jupiter Media Metrix. ``But there's plenty of room to be No. 2. And auctions are profitable.''