Yahoo does a great job supplementing its advertising revenue with a growing subscription revenue. I like companies that offer valuable free services and then upsell you on additional premium services. I’ve been using Yahoo email for years and about 2 years ago started paying them $30-50 per year for additional storage space and spam filtering.
But even more, I like companies that offer valuable free services that are supported by other business models.
I’m beta testing Google’s new email service (gmail.com) and I will likely switch to it soon and stop paying Yahoo the $30-50 per year that I pay now. I wonder how many other paying Yahoo subscribers will drop them, even though Yahoo announced today it will give away 100 MB for free and give paid subscribers virtually unlimited storage space. Google’s free offering is 10 times better; and I bet Google will invent a better spam filter than any other free email service. So I think Yahoo will lose a lot of folks.
Even so, Yahoo is having incredible growth in their subscription revenue (they have dozens of separate services) and CEO Terry Semel now sees Yahoo eventually getting 15 million subscribers to their various subscription services.
From Wall Street Journal (5-13-04)
… a research-firm estimate that Yahoo has 40 million e-mail users in the U.S. Separately, Yahoo’s Chief Executive Terry Semel raised his long-term target for paying subscribers to Yahoo consumer services by 50%, to 15 million from 10 million. Mr. Semel offered the higher target, which isn’t tied to any particular timeframe, during an analyst meeting Thursday. He didn’t change Yahoo’s subscriber forecast for this year, which is set at 7.5 million to eight million paying subscribers. Yahoo ended the first quarter with 5.8 million paying subscribers, double its year-earlier levels.
Yahoo ended 2002 with 2.2 million subscribers, up from 375,000 subscribers at the end of 2001. Yahoo for the first time also disclosed that a partnership with SBC Communications to provide Internet access accounted for about half, or 1.1 million, of its subscribers at the end of 2002. The rest of Yahoo’s subscribers pay for a hodgepodge of other services, including deluxe e-mail packages and online matchmaking. Yahoo executives said demand for high-speed Internet access through the SBC partnership has been particularly strong, which the company is counting on to meet its goal of adding 1 million subscribers annually.