How Yahoo Could Turn Third-Party Apps Into A Big Moneymaker

This story was written by Joseph Tartakoff.
So far, the introduction of third-party apps to Yahoo properties has been talked about mostly as a way for the portal to keep users on its own sites for longer. But in a report today, Citigroup Analyst Mark Mahaney raises the possibility that third-party apps could provide a newand significantrevenue stream for Yahoo, a la the Apple (NSDQ: AAPL) App store. "To the extent that Yahoo is able to serve as a large platform for applications (free and paid), is able to highlight relevant applications to its users, and is able to make the purchase of the paid applications seamless ... there is a potentially significant new revenue opportunity here for Yahoo," Mahaney writes. He adds that app saleswhich he refers to as "micro-transapptions" could be a "multi-billion dollar (profitable) revenue opportunity"with other internet companies, such as AOL (NYSE: TWX), Google (NSDQ: GOOG) and MSN cashing in as well.

Mahaney's analysis seems logical, particularly since Yahoo's new home page will prominently feature a list of outside apps. However, for Yahoo to garner significant revenue from third-party apps, it will have to change its app selection. Most of the third-party apps available now (all free, by the way) bring free services that already exist elsewhere on the internet to Yahoo (NSDQ: YHOO). See, for instance, the new app to the right. Yahoo users wouldn't be paying for unique functionality but rather for the convenience of accessing those services from their customized myYahoo pageor eventually from the home page. Can't speak for other web users, but that's not something that I'd pay for.

By Joseph Tartakoff