Yahoo! Fees to Bolster Auction Ad Revenue

Industry analysts rejoiced this week as Yahoo announced plans to begin charging a listing fee for its online auctions, supplementing its revenues from advertising.

Starting January 10, the Santa Clara, Calif.-based online giant will begin levying what it says is a “nominal” fee on all sellers who wish to put an item up for auction. That change will help improve the service and experience for buyers and sellers, the company said.

“As an Internet leader, Yahoo constantly reviews and enhances its products based on consumer response and need,” said Tim Brady, senior vice president for Yahoo network services. “The improvements we are making in our commerce properties will help ensure that we maintain the highest quality online experience available to buyers and sellers.”

An insertion charge will be levied based on the value of the item’s starting or reserve price, and will range from $.20 to $2.25. That’s in addition to a $0.40 to $0.75 fee for reserve auctions that must be paid if the auction does not close successfully. Still other charges could apply if sellers choose listing options such as icons, bolded listings, or featured auction placement.

As reported by Internet Advertising Report’s parent, internetnews.com, analysts from Goldman Sachs estimate that Yahoo could see an incremental $26 million in 2001 revenues from the listing fees.

“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,” said Brian Fitzgerald, senior producer for Yahoo Auctions.

Spokespeople were quick to add that the company does not charge auction closing fees — unlike competitors like eBay.

“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,” Fitzgerald said.

While financial analysts praised the move, the news could contribute to the troubles facing ad-supported content firms and online advertising companies because it signals a loss of faith in advertising as the sole means of support for the auction area. Both ad-supported content firms and online ad companies are currently are generally out of favor with investors, and both are looking for some sign of vindication of online advertising.