Will Apps Be the Next Yahoo! Stock Catalyst?

The new Yahoo! Mail interface. Source: Yahoo!.

Soon, you'll have to pay more to use ad-free  Yahoo! (NASDAQ: YHOO  ) Mail. I know because I got the email. "As a loyal user, you are locked in at your rate of $19.99 per year until you cancel the service. New users will pay $49.99 for Ad Free Mail," the note read.

Seriously? A $30-per-year change? I guess we know how much CEO Marissa Mayer cares about the "Stream Ads" strategy. She and her team appear to be using punitive pricing to get users to try Mail with contextual advertisements.

Meanwhile, new users who sign up for ad-free apps like Mail are going to pay more, creating what could be a nice little side business. Think of what Google has done. At least one estimate pegs revenue from the search king's Apps suite at close to $1 billion. CEO Larry Page says 5 million businesses use Google Apps, while a half-billion or more are using Gmail.

Yahoo! doesn't have the same scale, but it also doesn't need it. Convincing Mail regulars to try related apps would be a perfectly good start. Again, look at Google, which continues to use Gmail as its gateway drug for apps and as a training ground for contextual ads in other apps. (YouTube, for example.)

Finally, I'd be remiss if I didn't acknowledge a certain irony at play here. Business Insider's Henry Blodget was sold on the idea of reformulating Yahoo! around mail and IM years ago. I wasn't convinced at the time. Today, we know apps have become central to how we work as we transition from PC to tablet to phone and back to PC. Mayer is right to be focusing development on clean, delightful, useful apps like the new Mail.

The more apps like this Yahoo! has, the more users will show up. Some, like me, will even pay a premium for the privilege. Advertisers will absorb the cost of the rest. It's a modest growth strategy, sure, but one that can work with time and effort.

Think I'm wrong? Have a better idea? Share it in the comments box below.

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  • Report this Comment On October 17, 2013, at 12:09 PM, ObserverJanuary wrote:

    It is a pity how much Yahoo's new mail drives loyal long-term users away. The latest update of Yahoo Mail's web interface took away crucial functions. The uproar already reported in the New York Times (http://bits.blogs.nytimes.com/2013/10/16/furor-over-yahoo-ma... is not about design. It is about basic needs of customers.

    When you repell your present customers, how long can you stay in business if you don't get hordes of new prospects turning into loyal fans? But Yahoo Mail is nothing more than sort of a copy of Gmail now. What should be attractive about it for prospects?

    It is a strategic blunder of CEO Mayer to burn the current Yahoo Mail customer base before she knows her new strategy works. I'd say Yahoo's volatility is highly above average and its average expected profit profoundly below average given the risk of this tactic. Yahoo should keep its web Yahoo Mail customers happy. If not out of decency then out of prudence.

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