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Yahoo drops fees on payment service

The company restores a free version of its person-to-person payment system, in a sign that fees may not always fly with visitors of the online portal.

Yahoo has restored a free version of its person-to-person payment system, in a sign that fees may not always fly with visitors of the online portal.

Yahoo in the last week removed some fees from PayDirect, an online service that lets people exchange money via e-mail. The Sunnyvale, Calif.-based company is backtracking nearly eight months after it made PayDirect fee-only.

The partial reversal is testimony to an industry in flux. While some dot-com companies, including Microsoft-owned Slate, dickered with Web site pricing in the last five years, most Net services and content owners supported free sites through advertising. But as the economic model underlying free sites cracked, Net publishers introduced a host of paid services to reduce dependence on weak ad sales.

Web visitors may still be reluctant to pay for some services, however.

In the last week, Yahoo split PayDirect to give customers two options. One, a free account, is designed for family and friends who want to exchange money online without using credit cards. (Previously, Yahoo charged all subscribers, even if they didn't use a credit card.) The "professional" service racks up fees from the customer who accepts credit card payments--a common practice for online auctioneers. Yahoo charges 30 cents plus 2.5 percent of the cost of each transaction made using the service.

The fees are comparable to those charged by other online payment services including PayPal, which recently agreed to be acquired by eBay.

Yahoo said that the new free service is a test and will officially launch in the fall. The company would not elaborate on its reasons for introducing a free version again.

?We are very pleased with the progress of the PayDirect product, which is well positioned to be the best and most reliable online payment alternative for consumers and businesses,? a company representative wrote in an e-mail.

In the last year, Yahoo added fees for access to a wide range of content and services, including auction listings and personals ads. Yahoo had said it had about 1 million visitors who pay for services at the time it reported second-quarter earnings last month.

Researchers see long-term promise in the online subscription business. A recent study by the Online Publishers Association (OPA) and Web measurement company ComScore Networks showed that U.S. consumers spent $300 million to access Web content in the first quarter of this year, a 155 percent increase from the same period a year ago. During the first quarter, 12.4 million U.S. consumers became online subscribers, up from 5.3 million last year.

On a yearly basis, spending for online content in 2001 increased 92 percent to $675 million from 2000.