Yahoo! Bids Farewell

I hate to be the bearer of bad news, but Yahoo! (Nasdaq: YHOO  ) is shutting down its U.S. auction site next month.

Perhaps I should first have mentioned that, yes, Yahoo! does run a domestic consumer-to-consumer auction site. No, really. Since the 1990s, companies like Yahoo! and Amazon.com (Nasdaq: AMZN  ) have tried to take on eBay (Nasdaq: EBAY  ) with rival marketplaces. A few years ago, Overstock.com (Nasdaq: OSTK  ) made its own splash in the bid pool.

Cheaper fees have been these upstarts' weapon of choice in attacking eBay -- but it seems like they're all armed with rubber swords. None of these non-eBay sites have been able to sway enough sellers to their side, and bidders have similarly stayed put. If a site can't deliver a sizeable audience, its auctions are often quiet, lonely affairs indeed.

You can't win a pricing war if you're not on the same battlefield
Waging a war on price was never a good idea. It seems even dumber now that sites like Craigslist and Google (Nasdaq: GOOG  ) Base make online classifieds a largely free and painless process.

Don't assume that Yahoo! is a global failure on the auctioneering front, though. In Japan and China, Yahoo! has dealt eBay body blows by arriving early and teaming up with strong local partners. It's just never stood a chance closer to home.

Proof of Yahoo!'s globetrotting ways can be found on the landing page of Yahoo!'s own stateside auctions site. After being notified of the June 3, 2007, listing deadline, visitors are invited to check out the active Yahoo! auction sites in Taiwan, Singapore, and Hong Kong. 

The last of the Yahoo! auctions will end on June 16. Perhaps that comes as a merciful relief to sellers who didn't realize that the place was overcome by cobwebs and tumbleweeds.

The empty playing field
How bad were things at Yahoo! Auctions? I decided to check it out. The Sports Cards & Memorabilia category seemed encouraging at first, with 188,417 listings as of this morning.

But something didn't smell right. I saw collectible cards go unwanted, even though the asking prices were mere pocket change. I decided to sort by the number of bids. Of those 188,417 auctions, just 326 -- or 0.2% of all listings -- had any bids at all.

But as any auctioneer will tell you, it's not an auction unless you have at least two bidders trying to top one another to get a seller the best price possible. How many of those 188,417 auctions had at least two bidders going at it? Sadly, just 76 -- or 0.04% of all listings -- had competitive bidding in action.

An opportunist could rob this ghost town dry over the next few weeks, snapping up huge bargains. But buyers, beware -- seller scruples may be iffy, now that the lame-duck site will make negative feedback pointless.      

Another brick in eBay's wall
Is eBay vulnerable? Perhaps. Marketplace listings have grown stagnant domestically. eBay's saving graces have been healthier conversion rates and higher average selling prices.

The improving metrics per auction, oddly enough, may be the result of the higher fees that upset active sellers on the site. Higher insertion fees make sellers less frivolous about what they sell, and more realistic about the starting and reserve prices they choose. After all, sellers who only wanted cheaper could just go to Yahoo! Auctions instead.

Well, for another four weeks, at least.   

Yahoo!, Amazon.com, and eBay are Motley Fool Stock Advisor recommendations. You can find out more without having to bid even a penny. Just take advantage of a free 30-day trial subscription.

Longtime Fool contributor Rick Munarriz once bought something through a Yahoo! auction several years ago. Yes, he was the lone bidder. He does not own shares in any of the companies in this article. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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