Tech Industry

Yahoo's e-commerce vision prevails

The company will replace GeoCities' e-commerce efforts with its own, and will bring that firm's users to its auction and marketing areas.

Yahoo will dump GeoCities' e-commerce efforts in favor of its hosted storefronts and extend its personal auctions, classified ads, and direct marketing activities to GeoCities' 3.5 million users, Yahoo's chief operating officer said today.

Profitable Yahoo is paying about $4.6 billion in stock for money-losing GeoCities, whose users are considered intensely involved in the Internet. Yahoo COO Jeff Mallett said the GeoCities brand will be maintained, renaming the operation "Yahoo GeoCities."

Each company brings to the merger its own e-commerce strategy, but Yahoo's vision will prevail.

"It will be one integrated offering," Mallett told CNET News.com in an interview today. "We'll use the front-end publishing tools that the GeoCities guys have built [to create Web pages], integrate it on the front end, and put in all the Yahoo auctions, chats, clubs, and message boards."

Mallett intends to abandon the GeoShops initiative, an underwhelming effort to host small Net storefronts related topically to GeoCities neighborhoods. GeoCities had been reevaluating GeoShops anyway, but Mallett said GeoShops will be scrapped when the deal closes in several months in favor of Yahoo Stores, based on software Yahoo acquired last June with Viaweb.

"They have had vendors to sit under GeoShops, but they haven't been successful," Mallett said. "Demand has been huge, but it's not scaleable and there's not a critical mass for merchants."

That could jeopardize a major deal GeoCities signed last week with e-commerce software provider Interworld, although Yahoo may need an enterprise-class back-end like Interworld to supplement its Yahoo Store tools. Mallett said Yahoo is in discussions with Interworld.

But the news is better for Be Free, which offers software to let Web merchants create affiliate networks. Mallett enthused about GeoCities' deal to use Be Free software, also signed this month.

One possibility: Let homesteaders, as members who create home pages hosted by GeoCities are called, become affiliates for Yahoo Stores' 3,500 merchants.

"We are looking at that," Mallett said, essentially laying an e-commerce model over the existing media or publishing activities on both Yahoo and GeoCities.

Expanding Yahoo's auctions into the GeoCities domain will be good news for Net auctioneer Onsale, which provides the person-to-person auction on Yahoo. Yahoo's auctions, supported by ad revenues, are free to buyers and sellers, unlike eBay's competing operation.

Mallett envisions allowing new GeoCities members to set up a store, become an affiliate, place a personal ad, or offer an item for auction--all in the registration process. "We will try to integrate them more upfront," he said.

For ad sales, the deal opens up a vast inventory of new advertising possibilities. Yahoo has 2,000 advertisers on its network, compared to 300-400 for GeoCities, meaning Yahoo can go to 1,500-plus of its current advertisers and offer them banners on GeoCities pages.

Yahoo will sell GeoCities banners with its existing sales force, Mallett said.

For major merchant sponsorships, Yahoo and GeoCities share deals with Amazon.com, software store Egghead.com, and music outlet CDNow. Existing contracts will be honored, but Yahoo rarely signs exclusive agreements, so that will minimize conflicts where rivals have signed with GeoCities and Yahoo, as in the online mortgage market.

Still, Mallett isn't counting on a short-term boost in e-commerce revenues from the acquisition--and he's telling Wall Street the same. Still, although Yahoo and GeoCities have many users in common, the acquisition is expected to boost Yahoo's reach among Internet users by 10 percentage points.