According to a flurry of news reports, Yahoo Inc. is going to Viagraize its flagging revenues by cutting 12 percent of its staff. Although it announced a profit of one cent per share on a pro forma basis, against a 10 cent profit per share a year ago, the company is still ahead of many other dot-coms which are struggling for even marginal profitability. Still that's not enough to please stockholders who have watched the stock plummet from its year high of $160 per share slowly climb back from a humiliating $11.38 low. Key personnel have jumped ship (or been keel-hauled) including the CEO. Under that kind of pressure what should any self-respecting directory do?
Open a porno shop.
In a move that the company hopes will please shareholders, Yahoo Inc. is going to become the Amazon.com for the furtive porno lover, with a full stock of tapes, books and other sex-related items. In the process, Yahoo may just bring sex into the mainstream of online society. With an estimated 185 million users per month, it shouldn't be hard to tap into a good percentage of Web surfers who use pornography. After all, over 40 percent of all Internet sites are devoted to sex content. Why shouldn't Yahoo get a piece?
Gasp! Is that the right solution for a struggling business plan? In our sin-taxed society, Yahoo thinks so, and in an amoral kind of way, it makes perfect sense. If you've ever bought a pack of cigarettes or a bottle of booze, you've been penalized by your own government for your vices, as the taxes you pay on such items carry the freight for many who can't afford such nonessential sins. There's a thin line between smokes and porn, apparently. It's only one more step to let the sex addicts pay for the ad budget cuts, the free content, and those millions of free-loading viewers straining the servers.
While retailers are charged $200 to list their products on Yahoo Shopping, the site piously charges $600 for adult-themed content. Hard-core DVD and video sales run on a password-protected site in the Yahoo network.
Why can't a company with 2 million users make money without stooping to porno? Because most of the site's uses are free for consumers. And now Yahoo is drawing a line between giving it away, and getting paid. Instead of pointing to pornographers, the site is going to take a piece of the action.
Will Yahoo lose visitors because it is now a pornography reseller? Who cares? Those visitors weren't paying, say the bulls. Yahoo has hit the magic formula - how to please investors and paying consumers at the same time.
And that is the dilemma of a public company in a nutshell. Investors want returns. Customers want goods, hopefully of good quality and a fair price. Sometimes nobody gets what they want, as recent markets have shown.
And that brings us to a natural comparison - Homestore. As the largest publicly held company in the online real estate world, Homestore is facing many of the same challenges as Yahoo.
Homestore is also an advertising-based portal, with millions of consumers who shop around for free. But ad sales are dropping. According to former tech bull Merrill Lynch analyst Henry Blodget, online advertising was also due for a market correction, and will shrink by 25 percent across the board. Homestore has already been chastised by analysts for an overreliance on ad revenues and has diligently worked over the last year to raise subscription rates. Translation: sell more stuff to real estate agents.
Like Yahoo, Homestore, the market leader in its sector, is also climbing its way back from a high of over $130 per share to a dizzying drop to just over $14. Now at $28 and still climbing, Homestore is in better shape than Yahoo, but it still has the investor hounds from hell on its heels. So how can they raise more money from agents? Answer: stick to proprietary products and don't let them access competitors.
What is Homestore famous for? Homes. What do consumers want to see online? Homes. Homes with pictures. Solution: make agents buy Homestore pictures.
Homestore owns the rights to Ipix virtual tours in the real estate space. Tours are $99 apiece for agents who want to link virtual tours to their online listings. ( A lower cost do-it-yourself model available.) Yet Homestore will only allow listings online with Ipix tours, and will not enable other vendors even at the agents' requests to do so. The reason? There's no revenue model for Homestore to let other tour operators make money. The official reason is quality control, says Steve Ozonian, Realtor.com's president. "We are customer-focused and looking into it," Ozonian told Agent News last month.
But in a classic investors VS customers stand-off, some Realtors are not only growing angry, they are finding ways to get around Homestore's egocentric business model. Realtors Vikki Morvant, Jim Lee, and others are using their enhanced listings package from Homestore (via the I-Lead Web site lead generation package) and putting a hyperlink to the virtual tours and video clips of their choice in the remarks section of the listing.
But a solution doesn't make the problem go away. "What a great many of us are concerned and disturbed about is the fact that Homestore refuses to allow existing, less expensive alternatives to Ipix be used in the "official" virtual tour section of our listings on www.realtor.com and we're forced to "cobble" them in on our own," says Lee.
Homestore could not be reached for comment for this story, despite several attempts through a maze of PR personnel. Is there a technology issue? A quality issue? A revenue issue?
Ipix competitor VisualTour.com's vice-president of marketing J.L. Winn maintains that there is no technology issue keeping Homestore from linking to his customers' visual tours. While Homestore spokespersons say that the company is "sorting through this difficult issue," Winn says it is doing so without contacting him. "We have offered our assistance and resources to help to resolve these issues quickly, but we have had no response to our offers."
"The technical issues involved are actually very simple, and our organization has already resolved them repeatedly with several other national and regional real estate listing portals," offers Winn. "Each time we have done this has caused less than one day of effort on the part of the technical people involved (usually just a few hours). In fact, we've even accomplished this automatic linking with a subsidiary of Homestore last year (The Enterprise Group)! I hope these people are in on the around the clock meetings and can provide some insight to the sortings out. They can confirm that the complex issues are not technical in nature. We frankly don't know what the other issues are or why they are so complex."
Homestore says quality is an issue. Some lower cost vendors allow agents to take their own photos, as Winn does. but if quality were really such a benchmark, why aren't more controls given for single property photos and property data? Of the 1.4 million listings currently on display on Realtor.com, many property presentations are sorry at best with unclear photos and incomplete property data. A startling number, as many as 25 percent by my random count of several neighborhoods, do not have photos at all. Because the data comes from the MLSs from the listing agents, the style and content is as varied on the listings as the individuals who have posted them.
According to Winn, in January, Homestore paid about $12 million for the exclusive rights to use Ipix virtual tours for residential real estate in the U.S. He says that Ipix just released their yearly 10K report for calendar 2000 which showed a loss of nearly $350 million on sales of about $54 million. "Can you imagine spending $8 just to bring back $1 in revenue into your business (net $7 loss)?"
No, plain and simple it is a money issue, which is designed to favor the investor over the customer. The problem is that other service providers sell their tours for one-third the price of an Ipix tour, leaving little room for a revenue-sharing model for the publicly-held gorilla.
Now don't get me wrong. I believe Homestore has every right to make money. But where do you draw the line between making money and making it harder for customers to keep theirs?
Some of these Homestore customers won't ever become Ipix tour users, they vow. So that puts Homestore between a rock and a hard place. How can Homestore get these agents to buy something? Anything? Will stonewalling on behalf of investors be the solution? Should they refuse to link any tours, therefore stifling the market for any agent to buy any tour? Or should they look to the customer to please the investor? Should they cut the cost of the Ipix tours? Charge to link to outside providers? Include so many Ipix tours in a platinum plus premium Web site package? Would they sell more tours if they were more affordable? Is there a profit model in linking to other providers? It's a complex issue indeed. How do you please investors and customers at the same time?
But Homestore has one thing going for it that Yahoo doesn't. Leadership. If a solution is possible, Stuart Wolff, Steve Ozonian and company will find a way. But here's a hint. Sometimes you have to play favorites. There's a time for investors to come first and there's a time for customers. If you don't have customers, you won't have investors.
Take a lesson from Yahoo. You can solve the problem before it gets bigger, or you can quit trying, and open a porno store.
