THE DAY AHEAD: Yahoo eyes e-commerce prize

If you want to know where Yahoo! Inc. (Nasdaq: YHOO) is heading with its e-commerce strategy just listen to this axiom from CEO Tim Koogle: "Dollars always follow eyeballs."

And Yahoo clearly has its eyes on e-commerce. Yahoo has the eyeballs with 385 million average daily page views in September. Those eyeballs led Yahoo to top even the most optimistic whisper number with third quarter earnings of 14 cents a share.

And now the portal wants to become more of an "e-commerce enabler."

Yahoo: An emerging e-commerce star?

Jeff Mallett, chief operating officer, said Yahoo enabled $100 million in transactions in the quarter via its auction, shopping and other commerce-related sites. That's nice, but the more important move in terms of revenue will be for Yahoo to get a slice of the transaction pie.

CEO Tim Koogle said Yahoo is working on that one.

Koogle said the company is evaluating whether to take a piece of transaction revenue for the 7,000 merchant sites it hosts. Amazon.com (Nasdaq: AMZN) is currently taking a chunk of transaction revenue with its zStore initiative. Yahoo typically collects just a hosting fee.

Koogle also said the portal could start charging a fee for its auctions, something eBay Inc. (Nasdaq: EBAY) has had success with. Yahoo auctions are nearing critical mass with 931,000 listings. The company could theoretically flip the switch and charge for listings.

Koogle said moves to grab more of the transactional pie are under review. "We are on the path to flipping that switch," said Koogle.

Don't expect anything for the fourth quarter though. Koogle mentioned early 2000 as the time these potential revenue streams would be evaluated. Yahoo probably wants to strut its stuff for merchants so it can raise the fees later.

Analysts said Yahoo could be charging all of its merchants per transaction by the end of the first quarter. The company will also be looking to get a slice of banking and bill presentment.

Yahoo hasn't had any problem raising ad rates and is putting together a strong direct marketing strategy courtesy of its 80 million demographic profiles. Getting a slice of the e-commerce pie could be an easy feat.

Judging from Yahoo's quarter last night, it will be really hard keeping Wall Street analysts from raising the bar even higher for the fourth quarter.

"We are looking for a strong Q499 from Yahoo!, driven in part by a potentially solid holiday e-shopping season," said PaineWebber analyst James Preissler in a report early Thursday.

"We believe Yahoo is making a transition from an e-commerce model that focuses on hosting merchant sites to one that increasingly monetizes transactions and thus we expect e-commerce revenues to increase as a percent of total revenues," he added. "Currently e-commerce accounts for about 30 percent of total revenues, with advertising making up the rest."

Optimistic on AMD?

No news from Advanced Micro Devices (NYSE: AMD) was definitely good news as the company easily topped estimates in the third quarter. Of course, Wall Street wasn't expecting much when a loss of 72 cents a share is good news.

AMD credited its Athlon processor, stronger prices for flash memory and strong demand for the upside surprise.

"We are highly confident that we can produce more than one million AMD Athlon processors in the current quarter," said AMD chief William Sanders.

That statement may give AMD fans something to rally around. But it would be prudent to wait for more turnaround evidence.

Enhancing CEO value?

Barnes & Noble (NYSE: BKS) announced plans to buy game software retailer Babbage's Etc. for $189 million cash.

So what?

Babbage's principal shareholder is Leonard Riggio, who happens to be chief of Barnes & Noble.

Luckily, Riggio didn't negotiate with himself. Barnes & Noble claimed an independent board evaluated the deal. It still looks shaky though.

Especially when Barnes & Noble didn't detail Riggio's profit from the deal.