December 8, 2003 1:21 PM PST

Yahoo launches paid service package

Yahoo introduced on Monday its long-awaited premium Internet services package, its latest effort to convert the millions of visitors to its Web portal into paying customers.

As previously reported, Yahoo Plus is an attempt by the company to bundle its many paid Web services into one monthly subscription plan. The company is fighting to keep up with its primary competitors--America Online and Microsoft's MSN--which also are looking to broadband Internet services as a way to generate more revenue.

Last week, Microsoft said it will launch its own paid Net services packages, MSN Premium and MSN Plus, in January at the Consumer Electronics Show.

Paid Net not a draw
Adult Web users showed little enthusiasm for paid online services, when asked which features they would hand over money for.

Would not pay 75%
Classifieds 5%
Personals and dating 4%
Photo storage and tools 5%
Wallet and ID services 1%
Enhanced e-mail 9%
Web hosting 7%
Web authoring tools 2%
Job sites 6%
Advanced IM features 4%
IP telephony 5%

SOURCE: Jupiter Research, June 2003

These plans, which are expected to cost less than $10 a month, are versions of MSN's online service, but without Internet access. For its part, AOL has launched a massive marketing campaign for its recently introduced AOL 9.0 Optimized online service, which is also available stripped of its Internet access for a charge of $14.95.

Yahoo has taken the discount route, saying it will charge $5.95 a month, with a free 90-day trial, for its Net bundle.

While it remains unclear whether these service bundles will appeal to consumers, Yahoo, AOL and MSN are pushing them out instead of waiting for clearer signs in the market.

"We cannot say if it's appealing to broadband customers, because there is not tremendous adoption yet," said David Card, an analyst at Jupiter Research. But "there's always value to bundling, because it's simpler and it ends up being a bargain," he added.

Yahoo Plus combines a number of paid services with a revamped version of its customizable My Yahoo Web page. It is aimed at people who are considering a move from dial-up Net access to high-speed broadband, which Yahoo provides through a partnership with SBC Communications. Most of the functions offered in the Yahoo Plus package already are included in its digital subscriber line (DSL) services.

The package, which is expected to launch this month, brings together communications and security features such as streaming media content, pop-up ad-blocking software, increased parental controls, e-mail, instant-messaging software and antivirus software. It also features a customizable toolbar that embeds itself in a subscriber's Web browser and provides links to the services.

As for e-mail, Yahoo Plus provides extra storage of up to 100 megabytes, message forwarding to POP (Post Office Protocol) servers, and enhanced antispam capabilities. It also offers expanded digital photo-sharing and storage, and access to the Yahoo by Phone service, which lets customers send and receive e-mail via telephone.

Entertainment features include video content and multiplayer online games. The video streams will be migrated from Yahoo's Platinum service, which the company plans to shutter as a standalone subscription service.

The package will also include Web access for up to 10 different individuals per family, with each person able to organize and save their preferences into their own toolbar.

Yahoo Plus is part of a growing list of paid services offered by Yahoo, which has seen considerable success in its DSL business with SBC and its paid e-mail product. Last quarter, the company reported that revenue from paid services rose to $79.4 million, an increase of 38 percent compared with the previous year.

However, some have questioned whether broadband users will want to pay an additional fee for the Net services packages, as they can already access many of similar features on the Web. The question is crucial for AOL and MSN, whose dial-up subscribers have been defecting in droves. One good sign is that AOL reported last quarter that it had added 340,000 new broadband members, many of whom subscribed to its $14.95 premium services plan.

"It seems like the potential impact of (Yahoo Plus) will likely be incremental," said Derek Brown, an equity analyst at Pacific Growth Equities. "It's a necessary product to have. But is it a game-changer in Yahoo's business? Probably not."

 

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