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Yahoo will close its online auction service for North America next month, signaling the Internet powerhouse's intention to focus on more profitable endeavors as it tries to snap out of a financial malaise. The Sunnyvale, Calif.-based company's auctions in the United States and Canada will end June 16, although some tools will remain accessible until Oct. 29. The closure won't affect Yahoo's auction services in Hong Kong, Singapore and Taiwan. Yahoo is retreating from North America's auction market nearly nine years after launching the service.

The retrenchment coincides with Yahoo's plans to phase out its original photo service this summer in favor of a more recent offering, called Flickr, that provides more sophisticated tools for sharing pictures. The decisions to close the auction and photo services provide the latest indication that Yahoo is reassessing the value of its far-flung Web properties in an attempt to reverse a revenue slowdown that has disappointed investors.

"Yahoo is continuing to align our resources to focus on core strategic priorities and deliver a superior user experience, and as part of this effort, we are re-prioritizing some products," the company said in a statement provided Wednesday. After stumbling through much of 2006, Yahoo opened the first three months of this year with an 11 percent decline in its profit. The slowdown helped spur speculation last week that Microsoft might try to buy Yahoo and forge a business partnership as both companies try to combat online search leader Google.

Yahoo's reshuffling mirrors some of the suggestions made last fall by one of the company's own executives, Brad Garlinghouse, who had urged the management to pull the plug on some less popular or overlapping services in a widely distributed internal memo. Garlinghouse's missive became known as the "Peanut Butter Manifesto" because it argued Yahoo had spread itself too thin.

Closing the North American auction service was a "no-brainer" because Yahoo had such an insignificant market share, said Bill Tancer, general manager of global research for Hitwise, which tracks Internet trends. Yahoo attracted less than 0.2 percent of the U.S. traffic to auction sites during the week ended May 5 compared with nearly 85 percent for the longtime market leader eBay, according to Hitwise. "If you can't compete in the space, it makes no sense to be there," Tancer said. By closing its auction site, Yahoo also might score points with San Jose, Calif.-based eBay, one of the company's major advertising partners.

Yahoo's closure of its original photo service is more risky because it actually is slightly more popular than Flickr. In the week ending May 5, the first-generation photo service attracted 6 percent of the U.S. traffic in its category compared with 4.8 percent for Flickr, Hitwise said. However, Flickr tends to attract more urban consumers who tend to spend more on technology -- a potentially more lucrative demographic that Yahoo apparently hopes to build upon.

Yahoo is encouraging the users of its original photo service to embrace Flickr. Recognizing not everyone will want to make the leap, Yahoo is offering ways for users to transfer their photos to competing services, including Shutterfly, Photobucket, Kodak Gallery and Snapfish.

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Last year marked the first time clothing retailers attracted more online shopping dollars than computer and software e-tailers took in, according to a report released on Monday. Travel continues to eclipse all other forms of consumer spending online, however, accounting for US$73.4 billion in revenue in 2006.

Revenue for apparel, accessories and footwear bought through the Internet totaled $18.3 billion, compared to $17.2 billion for computer-related purchases, according to Shop.org, the online division of the National Retail Federation. The group, in collaboration with Forrester Research, has been conducting annual online shopping surveys for 10 years. The increase is part of an overall growth trend for online transactions: Business-to-consumer e-commerce grew 25 percent in 2006, reaching total revenue of nearly $220 billion. That sum is expected to grow again by 18 percent this year to $259 billion.

Consumers are expected to spend $22.1 billion online for clothing and related goods this year, compared to $20.1 billion for computers and software, followed by auto and auto part sales ($16.7 billion) and home furnishings ($10 billion).

Retailers have helped customers jump some of the hurdles of online clothes shopping in the last year or two, Scott Silverman, executive director of Shop.org, said.
Some of those hurdles are security-related, Silverman pointed out. Many customers remain reluctant to use their credit cards online, for example. The advent of the gift card that can be redeemed online has helped, as well as other alternative payment methods such as PayPal and Google (Nasdaq: GOOG) Checkout.

In addition, e-tailers have taken away some of the uncertainty about making returns, Sucharita Mulpuru, senior analyst for the retail sector with Forrester Research, said. Increasingly, online merchants are allowing customers to return merchandise through the mail at no cost -- or even return an item purchased on the Web to a brick-and-mortar store. This has eliminated customer worries over getting stuck with clothing that appears different from the images presented on a computer screen.

Airlines were early adopters of Web technology, with the first versions of online reservation systems hitting the Internet years before many retailers ever had an online presence. Since most online buyers know what to expect from an airline flight or a hotel stay, travel remains a realm in which shoppers feel comfortable conducting online transactions.

Finding clothing that fits presents a separate challenge. Thus, fashion and accessory retailers have turned to tools that allow them to offer "a more natural shopping experience" at their online stores, including comparison features and views featuring multiple products, noted Silverman. Many of these tools are based on flash technology. Color swatching and the ability to zoom in on sophisticated product graphics and photographs have been key drivers, Mulpuru added.

Until recently, one factor that did not translate well from the real world to the Internet was word-of-mouth recommendations. Last year, clothing and shoe retailers began to catch up with the social networking phenomenon, owing new patronage to Internet-posted customer reviews that have become popular on clothing Web sites, Silverman said.

It's a big plus "to hear directly from other customers what a product might look like on them, or if it runs large or small," Silverman stressed. These types of reviews have been popular for some time on sites that sell books and electronic equipment, he noted. Their translation to clothing sites has gone a long way toward reducing reluctance among hesitant online shoppers.

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E-mail marketing is one of the most cost-effective ways to get your name in front of prospective or existing customers, to generate sales or stay top of mind. The e-mail messaging that clogs in-boxes around the world is known as spam, and with good reason: It is unwanted. Its solicitations are rarely acted upon. These annoying distractions offer little value and more often than not, such emails are deleted.

Now that we know what's wrong with this method of marketing, what could possibly be right with it? E-mail marketing (please don't call it spam for just a moment until you consider the argument) offers one of the most cost-effective ways to market to consumers. Startup costs are so small that any company can integrate a smartly designed campaign into its marketing program in short time.

With a few well-established rules of engagement, chances are it will make a reasonable return on investment very quickly. In some cases, the results, like the Internet itself, are immediate. What's more, e-mail isn't just a way to get your brand in front of people. It's an opportunity to establish engagement and dialog with customers. Here are a few rules of thumb that are sure to show success for even the newest e-marketers.

Rule No. 1: The e-mail must be anticipated.

Why waste time and effort sending e-mails to recipients who don't need what you sell, don't want your products and know nothing about you? We recommend sticking with "opt-in" e-mail lists to optimize results. Don't have an address list of hot prospects primed to buy? Not to worry. This can be accomplished in a number of different ways.

You can entice individuals to visit your Web site with special offers to those who opt-in. Banner ads can also drive people who have an interest in your offers. Of course, marketing materials of any kind should include your Web site. Once there, make it easy for people to act, driving your sales.

Rule No. 2: The e-mail must be relevant.

It's recommended that clients use information they gain about their customers selectively to keep them informed. If you are a jeweler, for example, and one of your customers purchased an anniversary ring for his wife in 2005, your messaging can remind this customer of the approaching date and also provide selective information about new jewelry designs and styles that would be perfect for the up-and-coming anniversary.

This puts the sender in the position of providing information that is needed and wanted. It's time-sensitive and it provides new product information based upon past behavior.

Rule No. 3: The e-mail must offer value.

Research shows that consumers act on offers of value more than anything else. Having a sale on widgets? Customers who bought widgets in the past are the perfect customers to buy widgets when they go on sale. The most successful e-mail marketing programs track this data and use it intelligently. I often ask company owners to think like their customers and answer the question: "Is my e-mail address worth parting with?" In this day and age, it's the equivalent of asking for a phone number that's privately listed.

Rule No. 4: The e-mail must be integrated.

For maximum benefit, your e-mail messaging must be integrated with both content and commerce feedback loops in the form of product up-sells that leverage database data to meet needs (e.g., the next most likely product model) and surveys that allow that allow the customer to provide data points that are used to better service and connect with the consumer.


It's also important to know that any company, regardless of size, can afford an e-mail marketing program. In this day and age, with the ease of measuring your real-time ROI, who can afford not to? Moreover, small businesses can get in the game for a relatively small investment. Using this marketing strategy won't break the bank and, better still, will help you make a trip to one.

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M-commerce, or mobile commerce, is poised to grow into a multibillion dollar market over the next decade. Phone handset makers, telecoms and content providers are pushing the technologies that will enable users with m-commerce-enabled devices to easily purchase products and services via the phone. Part 1 of this two-part series discusses the biggest obstacle to rolling out m-commerce: the potential conflict of multiple standards and technologies competing in an immature marketplace. While the U.S. and European Union markets are more crowded, closely regulated and contested, their size and technological infrastructure mean that they will be important proving grounds for m-commerce. There could be 10 million to 20 million m-commerce users in the U.S. by 2010, David Chamberlain, In-Stat's principal analyst for wireless technology, said.

In Europe, "the UK is showing some very positive trends. Specifically, in the music space, 3's full-track download services is second only to iTunes in digital music downloads," according to IODA's Mitchell. 3, owned by Hutchison Whampoa, is one of Europe's leading mobile telecoms services providers. "The U.S. market continues to show signs of massive growth," said Jeff Mould, CEO of Announce Mobile, adding that "consumer awareness, new applications and 3G handsets are building an m-commerce momentum and has only just begun to touch on the potential.

"The U.S. has long lagged behind the European and Asian markets in both handset technology and carrier adaptability. With increased consumer awareness and demand, the carriers are rapidly adopting new technologies, however, to meet the demand," he said. "The U.S. has several obstacles in the way that will eventually play a role in the growth of m-commerce," he pointed out. "Government regulation, carrier revenue models and privacy concerns will affect the overall growth of the m-commerce market within the U.S."

"I think that the mobile players need to open up and operate more like the Internet," Tim Mitchell, vice president of marketing at IODA, the Independent Online Distribution Alliance, said. "The opening of the 'walled gardens' will lead to greater innovation and much faster and wider adoption of profitable products like content services. Both networks require massive investment in infrastructure, so it will always be a few large players who operate the network, but now there is a choice to be made as to their roles really are," he said.

"Issues like net neutrality and whether or not ISPs are responsible for monitoring or stopping illegal file trading show that some really key issues haven't yet been sorted out on the Internet side. The reality is that mobile and Internet are going to merge together in a lot of ways, so these issues will cross over, to be sure," he noted.

"I believe lack of standards, or -- to note the cause of this -- lack of openness will hurt mobile commerce because it will hurt the ability of companies, be they the carriers or small software entrepreneurs, to innovate and bring to market products that consumers want and will adopt," Mitchell continued. "Without a vibrant and competitive marketplace, the right products won't be developed."

In terms of economics, entertainment and information services are driving m-commerce forward, just as they did in the early days of radio and television. Low-priced, relatively simple and straightforward content -- such as ringtones and wallpaper -- continue to be the revenue drivers in terms of product consumption. However, that is changing as network providers build out broadband wireless cellular and Internet connectivity, technology providers forge standards for streaming audio and video content, and manufacturers ship greater numbers of portable multimedia devices.

Therefore, more people will become familiar with -- and trusting of -- using m-commerce to purchase goods and services. "While we can't divulge any specific numbers, let's just say that our mobile revenue from 2005 to 2006 has gone up over 1,000 percent, and we sell only mastertones and full-track OTA (over-the-air) downloads," said IODA's Mitchell.

"Clearly, music is a big driver for mobile commerce, and many of the networks have chosen music as the bedrock of their content offerings," he continued. "Video is definitely gaining some momentum, though, and there have been full-length films sold and viewed on mobile phones as of this date in more than one territory. But I think only time will tell how video content plays for mobile."

So, broadly speaking, what needs to happen before m-commerce takes off? "The answer that comes quickly is local content -- content that is specific and unique to the markets in which the growth is hoped," Air2Web CTO Dale Gonzalez said. "In the case of India, a lot of that has to do with Bollywood ringtones and wallpapers of Sachin, the local cricket star."

"First and foremost, security and privacy concerns must be addressed at the hardware, carrier and content provider levels," added Announce Mobile's Mould. "Consumers want to know that their transactions are secure. A method for securely identifying the user to the phone must also be included. Currently, users do not have to typically authenticate themselves to the phone. In order for m-commerce to be truly secure [on] mobile devices, the user and phone must be 'tied' together securely,"

"From a handset/operating system/application standpoint, consistency and capability needs to be addressed. With various makes, models and technologies on the market currently, it is almost impossible to efficiently and effectively deliver content to all subscribers," Mould added.

New hardware and new technology must remain or become compatible with current m-commerce applications. Too much confusion or compatibility issues will drive consumers away, Mould noted.

"My hope is that it goes beyond local content and grows to a variety of content -- that we start to use the mobile device as a vehicle to purchase everyday things, as just another way to pay," Gonzalez said. "If that were to happen, you would see the broadest and fastest growth in the m-commerce space."

"I think there will be things where the use of the cell phone is more compelling, anything that's perishable, anything that's impulsive," he continued. "If you look at Internet commerce, the thing that's missing is that stack of stuff by the register as you're checking out. And you think, 'I do need batteries or I do need a flashlight.' The mobile device could be a way to capture some of that inventory and revenue. If 'm-commerce' became 'commerce' and you could just drop the 'm,' and then it would take off."

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As voice, data, wired and wireless telecommunications converge, conditions are ripening for the extension of e-commerce to mobile, or m-commerce, in markets around the world. So, what countries -- and companies -- are on the bleeding edge? Juniper Research estimates that global m-commerce revenue will exceed US$88 billion by 2009, a $69 billion increase from year-end 2005, Jeff Mould, CEO of Announce Mobile, pointed out. "The U.S. alone has an 8-to-1 ratio of mobile to PC users, according to Morgan Stanley. With e-commerce sales still soaring each year, it is only natural to see the same or greater growth in m-commerce revenues," Mould noted.

While defining m-commerce is a bit tricky and definitions vary, one thing is certain: The market is large and growing quickly, as networks and media converge and e-commerce extends to encompass m-commerce. "There have been a lot of estimates thrown around, but there are two or three problems with any estimate that anyone gives," Air2Web CTO Dale Gonzalez said. If you count cell phone ringtone and wallpaper downloads as as m-commerce, "you're talking about billions of dollars," Gonzalez said.

"If you throw in revenue associated with actual buying of other goods using the cell phone, such as tickets and perishable inventory, then the estimates are all over the board. The reality is probably very little money is getting made, but that's where the potential is," he added.

Opinions vary, but a consensus view has developed that Asian and emerging-market economies are hot spots for m-commerce. "The ones that seem to come up a lot as budding hot spots are India, China and various Latin American countries like Mexico and Venezuela," according to Gonzalez, who noted that Latin Americans "have a statistically higher-than-normal propensity to purchase goods on the phone. ... They have a higher-than-normal propensity to vote, to pay money to vote and to buy ringtones and wallpapers [when compared with the United States]. So, it stands to reason that Latin America will be important to m-commerce."

India's combination of a large population, recent rapid technological advancement and limited Internet infrastructure makes it an emerging m-commerce market, he continued. "Those seem to be important elements in terms of m-commerce. There are lots of people considered consumers; they have a high propensity and willingness to buy, and they have limited alternative options in terms of buying. That's why many people see India's potential as being very large," noted Gonzalez.

"I don't know what will really happen in China, but everybody seems to think that China is going to be big. Though largely, it seems [it's] because China itself is so big," he said. "Whenever they end up consuming anything, they consume staggering amounts of it. China has huge populations of people ... moving from rural China to urban China everyday. When that happens, there's a high purchase of cell phones. So you have enormous numbers of subscribers being added to the roles on a daily basis, although the jury's still out on whether they do anything other than make calls on those phones."

"Japan and Korea are very far ahead of the rest of the world with regards to innovation and consumer uptake of sophisticated data services. I believe this has as much to do with the way the carriers and handset manufacturers have approached the business as it does with geography and population density," Tim Mitchell, vice president of marketing at IODA, the Independent Online Distribution Alliance, said."I believe that Japan, per capita, probably has the biggest capacity for rapid growth in the short term. The rate of technological advancement and the very crucial fact that the carriers only take somewhere between 9 and 12 percent from transactions both have a huge effect," Mitchell added.

David Chamberlain, In-Stat's principal analyst for wireless technology and the author of "Mobile Wallet: More than M-Commerce," agreed. "Japan is the strongest right now. NTT DoCoMo has been pushing mobile transactions very hard by making investments in companies that could be places to use DoCoMo's FeliCa system," he said.

"The biggest problem I see is the possibility of multiple standards and technologies competing in the marketplace before the concept is completely developed. This competition could kill m-commerce altogether," said Chamberlain. "In Japan, in contrast, all the members of the ecosystem are working toward a common technology standard, with plans to compete after it has been established."

PART TWO TO FOLLOW

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Yahoo said Monday it is buying the remaining 80 percent interest in online advertising exchange Right Media that it does not already own for approximately US$680 million in a move aimed at boosting the reach of Yahoo's advertising to social networking sites. In October, the search giant purchased a 20 percent stake in the privately held, New York-based ad exchange firm. More than 19,000 advertisers, publishers and networks buy and sell advertising on Right Media's auction-based exchange.

Right Media runs an exchange in which advertisers and publishers buy and sell online ad placements in real time through an auction system. Yahoo is banking on grabbing the lead over Google in the niche ad market, where sellers gain greater access to a larger pool of advertisers. Unlike an ad network, an ad exchange is a marketplace where publishers and advertisers can execute advertising transactions. Ad networks aggregate inventory from publishers and resell it to advertisers.

"The acquisition of Right Media will further Yahoo's goal to create the industry's most open, accessible and vibrant advertising marketplace," said Yahoo chairman and chief executive Terry Semel. Although Yahoo is the market leader in display advertising used by large, brand-name marketers, the Right Media acquisition signals it is seeking to grow its presence in the micro-targeted audience such as individual social network profiles, Yahoo said.

Yahoo still remains a distant second behind Google in terms of online search market share and advertising revenue. Google's acquisition of premium ad network DoubleClick for $3.1 billion last week may have put Yahoo at even more distance.

Although on the surface the move looks like a defensive response to Google's DoubleClick acquisition, it isn't likely because the expansion has been in the works for the past year, said Forrester Research Vice President and Principal Analyst Charlene Li. "I think it's actually an offensive strategy for Yahoo to build on its dominance in the graphical ad marketplace," Li said. "Yahoo is putting a stake in the ground that the future for online display advertising lays in efficient, easy-to-use marketplaces, and it wants to be the trusted intermediary for that future."

Yahoo's move should make it difficult for Google to start its own ad exchange, which DoubleClick announced earlier this month. Right Media has been operating an ad exchange for over two years, giving it a management and technical experience edge over its rival, Li said.

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