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How Yahoo! Will Make You Pay





If you thought America Online was the home of the online hard sell, just wait till you hear from Yahoo! (YHOO). And we've got Yahoo!'s PowerPoint slides to prove it.

Touting its plan to augment advertising revenue with user fees, the Internet bellwether last week offered Wall Street a sneak preview of how it will pitch for-pay products and services to Internet surfers. Though those plans haven't been widely disseminated, TheStreet.com thought Yahoo! users and investors might be interested in seeing the blueprints of one of Yahoo!'s major pushes into fee-based Net services.

Of particular interest is the Internet access service Yahoo! will begin offering next year with regional telco SBC Communications (SBC). Yahoo!, which demonstrated the service for analysts last week in a presentation broadcast live over the Internet, pulled these illustrative materials from the archive of the Webcast, citing competitive reasons.

But TheStreet.com has assembled some relevant screen shots, glimpses of how Yahoo! won't shrink from marketing for-pay services in the SBC Yahoo! Internet service signup process. The mock-ups also illustrate how Yahoo! plans to execute a strategy emphasized by Chairman Terry Semel during the analyst day: bundling services, or tempting people to buy multiple offerings by giving discounts when they order more than one.

For starters, Yahoo! will be trying to get current customers of SBC's DSL high-speed Internet access service to switch to the new package the companies will be offering under the SBC Yahoo! name. (Though Yahoo! won't be specific about the SBC deal's terms, its revenue depends in part on the number of current SBC dial-up and DSL customers who sign up for the cobranded service.) As part of that effort, Yahoo! showed a illustrative screen of how that recruitment process would work -- perhaps in conjunction with the offer of a free Web cam for signing up.

Once the sign-up process starts, Yahoo! gives these customers a taste of its premium services, according to the analyst-day scenario. Among the options listed in the mock-up are personalized radio, membership in a games community, one enhanced Yahoo! Personals ad per month or two Consumer Reports reports per month.

In hope that the previous screen has whetted people's appetites for more than one premium service, Yahoo! then plans to offer a volume deal. Pick any three premium services from the general categories of entertainment, professional and life management, and you get 20% off the three-service bundle. (Yahoo! didn't reveal pricing plans for the service.)

On another screen, not pictured here, Yahoo! encourages users to download a specially branded browser of other Internet software for the PC. One upshot of that is to create an Internet experience firmly identified with Yahoo! and SBC through such features as the Yahoo! Messenger buddy list on the left-hand side of the screen, a personalized calendar on the right, and logos for SBC and Yahoo! on the top. The software, partly through prominent placement of a media player, also makes it easy for Yahoo! to encourage high-speed data applications enabled by SBC's DSL service. Here's a mock-up of the opening screen for SBC Yahoo! users:

Friedman Billings Ramsey analyst Rob Martin says the marketing approach illustrated by the slides -- "typically invasive," he says, yet "no more invasive than AOL" -- indicates a major change of heart for Yahoo!. "They're taking a lead from the No. 1 competitor in building a front-end interface," he says. "Yahoo! has gone from being hands-off to hands-on." (Martin has a market perform rating on Yahoo!; his firm hasn't done underwriting for the company.)

And it's clear that AOL is the model for Yahoo!'s marketing. Greg Coleman, Yahoo!'s executive vice president of North American operations, pointed out during the analyst day that AOL was carrying four times as much advertising as Yahoo! was. "That is what I call a raving opportunity," he said.

Well, get ready for the rave.

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