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Yahoo-Visa deal on shaky ground

Joint development of a standalone electronic commerce site to be called Marketplace is on hold.

A lot can happen in a year--or not.

Case in point: Yahoo's (YHOO) agreement to develop the Marketplace electronic commerce site in conjunction with Visa International is on shaky ground.

Under the April 1996 agreement, Marketplace was to be a standalone Web site devoted to pointing consumers to online shopping. But that agreement--reported earlier by CNET's NEWS.COM--was delayed, according to a Securities and Exchange Commission filing in May, and now appears all but dead.

"We originally planned on launching a commerce-centric, standalone site, but there will not be a standalone site in the near future, period," Yahoo CEO Tim Koogle said. "We watch consumption patterns, then gauge [usage], and then we consider making it a standalone site."

Visa has also apparently put this project aside. Spokesman Greg Jones said that the two companies had held discussions but the project is not a Visa priority.

"I can't confirm that there is or is not a deal with Yahoo. We have been working with Yahoo regarding strategic marketing, but I'm not familiar with Marketplace," he said. Jones noted that he has queried his colleagues on the matter.

Instead of working with Visa on developing Marketplace, Koogle said Yahoo is now ramping up existing sites that feature direct links to electronic commerce services like travel and finance.

"What we have been doing is specialty aggregation of commerce-related things, as opposed to a standalone site," he added. Koogle said that Yahoo has a good relationship with Visa and that they are working together on cobranding and copromotion.

Marketplace, originally scheduled to roll out in March, was conceived as a consumer navigational media property, directing users to other sites that offer electronic commerce. The agreement projected up to $1.65 million in payments to Visa as a percentage of the sales generated from sending people to commerce sites, according to the SEC filing.

The joint venture, at least initially, represented all of Yahoo's promise in the online transaction arena, according to Scott Ehrens, an analyst with Oppenheimer & Company. But reality soon set in. "It had been slow to start and a little more difficult and less fruitful than expected," he said.

Larry Fishkin headed up the joint venture as Yahoo's vice president of business development. But he left the company in the second quarter, and no successor is expected.

Instead, the project has been passed to Jeff Mallet, who is Yahoo's senior vice president of business operations.

Some analysts remain concerned about Yahoo's lack of progress in transactions. Greg Vogel of Montgomery Securities said that as things keep getting pushed back Wall Street wonders what the issues are behind the delays.

"My concern is that maybe they decided they can't make any money on such a service, and that is a concern because they need to diversify their revenue to keep growing the business," he said.

The company needs to have other businesses in case advertising on the Web slows down, Vogel added, noting that online advertising as a business model is in its infancy. "Yahoo as a one-product company is good, but a two-product company is better...We don't know where advertising is going to go, but commerce is going to be a big opportunity."

Yahoo is one of the first advertising-based Internet companies to turn a profit. It surprised analysts in its fourth quarter of last year by reporting profits of $96,000.