Yahoo! Gains as Analysts Praise Fee Move

Yahoo! Inc. (Nasdaq: YHOO) rose 2.75 to 30.94 Wednesday, erasing an early loss following reports that analysts praised the company's decision to charge listing fees for its auctions.

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.

Merrill Lynch analyst Henry Blodget reportedly praised the company's decision as well, saying it could add US$30 million to $80 million, or 3 to 5 percent, to 2001 revenue.

On Tuesday, Yahoo! said that beginning January 10th, it will charge 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.

Merrill's Blodget reportedly said that while the change could drive some users over to rival eBay, Yahoo! auctions will still be cheaper. Unlike other sites, Yahoo! will not charge closing fees or take a percentage of an item's final price.

"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 Yahoo! Auctions senior producer Brian Fitzgerald.

Fitzgerald added, "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."

According to analysts, Yahoo! needs new sources of revenue, as the online advertising market remains in a slump.