Holiday Shopping Soars at Yahoo! Matt Richey (TMF Verve)
November 29, 1999
Yahoo! (Nasdaq: YHOO) shares traded up most of the day but ended down $3/4 at $226 1/8 in late afternoon trading. This move comes after this morning's announcement of huge holiday sales on Yahoo! Shopping during the past week.
The Friday after Thanksgiving, known as Black Friday, is traditionally the biggest offline shopping day of the year, and early holiday sales on Yahoo!'s commerce sites suggest this pattern is no less true in the online world. This past Friday's transaction volume on Yahoo! Shopping was up more than five times that of Black Friday last year. Compared to the same Friday last month, orders are up more than 110 percent. Even compared to the previous Friday only a week ago, orders rose more than 35 percent. All in all, over the 10 days preceding Black Friday this year, Yahoo! Shopping processed more orders than during the entire 1998 holiday season.
Convenience is the name of the game at Yahoo! Shopping, which offers consumers an extensive selection of millions of products from more than 8,000 merchants all in one place. Merchants large and small are attracted to Yahoo! Shopping as a place to put their wares in front of a lot of eyeballs -- 105 million pairs to be precise. Just click into shopping.yahoo.com to see some of the major retailers, such as Nordstrom and Macy's, who are paying big bucks for "Featured Store" status. Yahoo!'s average advertising contract is $49,000. With renewal rates running at 96%, Yahoo! is clearly helping these customers sell more stuff.
Adding to the convenience proposition is Yahoo! Wallet, a feature introduced in early October that securely stores credit card and shipping information, thereby eliminating the tedium of repeatedly typing in this info each time a purchase is made. With Yahoo! Wallet in place, the one-click buying experience on Yahoo! Shopping is just as convenient as that of Amazon.com (Nasdaq: AMZN). But unlike Amazon, Yahoo! merely facilitates transactions rather than selling the goods outright. Yahoo! lets the selling party handle the heavy lifting of holding inventory and distributing the goods. That makes Yahoo!'s role very low cost and highly profitable.
Yahoo!'s industry-leading audience -- in terms of both reach and repeat use -- gives it the unique ability to place a seller's product in front of the individuals who are most likely to buy. In this aim, Yahoo! is particularly well positioned thanks to its database of 80 million registered users, including active demographic groups such as 36 million young adults (ages 24-34), 32 million women, 16 million business professionals, and 15 million college students. By data mining this huge and growing base of users, Yahoo! is making a very big business of targeted marketing services.
Yahoo!'s lucrative position between consumers and businesses is proving to be quite a powerful one. For the holiday quarter, Wall Street is expecting revenues of $183 million and profits of 15 cents per share. Admittedly, those are relatively small numbers for a company with a diluted share market value of nearly $70 billion. (That's bigger than Walt Disney's (NYSE: DIS) $60 billion market cap.) Even so, Yahoo!'s business benefits from the wonderful attribute of fixed costs and infinitely scalable revenues and cash flow. As the Internet goes mainstream across America and the rest of the world over the next decade, Yahoo! has a model in place that could spit out a tremendous amount of cash. That said, the stock isn't cheap and only deserves the consideration of long-term (five-plus years) investors.
Yahoo! Holiday Shopping Press Release (11/29/99)
Yahoo! Wallet Press Release (10/5/99)
Yahoo! -- Rule Maker (10/7/99)
Yahoo! Message Board