Yahoo Dumps Its Online Auction Site

Yahoo said today that it's closing up shop on its little used online auction site after being pummeled by eBay. How bad was the beating? In March, eBay brought in 60 million visitors. Yahoo's site, on the other hand, couldn't even bring in the minimum 330,000 visitors it takes for Nielsen/NetRatings to tally its traffic. 

Why did Yahoo's site fail? Yahoo didn't have enough users to make its service valuable enough to keep drawing new users to its site. It was another example how failing to achieve a network effect can spell doom for an Internet site. This is one of the main reasons why Internet startups fail. 

Yahoo's decision to shut down its service is a case of if you can't beat them, strike up a few deals with them and close up the losing site when you're finished. The two companies made a few agreements recently, and now Yahoo accepts eBay's PayPal for payments across its network, and eBay places Yahoo ads on its listings. So, it makes sense for Yahoo to fold up its service given its relationship with eBay.

What does the closing of its online auction site mean for Yahoo? Well, it shows that it still working at getting over its "peanut butter" problems by streamlining its product line. But what if Microsoft does buy Yahoo? The combined company would have a mountain of products, many of which are competitors. Some will have to go. If the deal does happen, it will be interesting to see which products make the cut.