Free Is Bad

“Free is a magic word,” said Dick Benson. Uh-uh.

Yahoo has 196.6 million unique visitors each month.

Yet Yahoo generated zero new revenue in 2013.

My opinion: Yahoo CEO No. 6 (in as many years), Marissa Mayer, is hanging on by her fingernails.

Any person with 196.6 million names unable to generate new revenue should seek some other line of work.

What triggered this column was a Feb. 17, 2014 Time magazine story,THE MAYER EVENT: It’s crunch time for Yahoo’s turnaround strategy.” [See the first image in the media player at right]

The Time MBAs came up with five pronouncements for Yahoo’s Road to Recovery:

  • Getting Newsier
  • Launching a Network
  • Powering Your Apps
  • Streamlining Its Ads
  • Reinventing Search

Not one of these programs asks for money from the 196.6 million users. The business model is all about getting advertising dollars.

Alas, Yahoo Ad Sales Have Been Tanking for a Year
The company’s closely watched display-ad revenue, which makes up about 41 percent of the company’s total
, fell another 5.6 percent even as the overall market grows quickly.Douglas MacMillan, The Wall Street Journal

It’s clear Mayer knows nothing about marketing. Neither she—nor the smartypants MBA writers at Time—have a clue about the technique of making offers, asking for orders, making it easy to order and delighting happy customers.

“People love to be sold stuff,” said my first employer Frank Watts.

A Quick History of Paid to Free
When the Internet started to take off in the mid-1990s, the mantra of the kids who started it was “Everything should be free.”

I switched from AOL to Yahoo as my email provider in 2005.

When AOL offered free service to its paid members, it lost 12 million paid subscribers and $1 billion revenue a year

In the past 8 years, I have never paid Yahoo a penny. I have never responded to a Yahoo advertiser. I have never used Yahoo for search. I don’t read Yahoo News, Sports, Finance, Weather, Games, Groups, Food, Tech, Answers, Screen, Shopping, Travel or ♥♥ Dating.

Denny Hatch is the author of six books on marketing and four novels, and is a direct marketing writer, designer and consultant. His latest book is “Write Everything Right!” Visit him at dennyhatch.com.
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Comments
  • Tim Orr

    Too much "free" is definitely habit-forming, to the point where people finally won’t "buy" unless it’s free, or at least, so heavily discounted as to be nearly so. As we used to say, "Well, we’re losing on every transaction, but we’ll make it up on the volume." At least, as Ogilvy said, "Direct sells – or else!"

    The other gripe I have is with special offers to "new" customers. Recently, I was offered one of these by a company I’ve supported for years. I took a shot, and wrote to them, complaining that if I were a new customer, I’d be getting all these nice discounts, but as a long-time, faithful customer, I get nothing. Their response clearly indicated they didn’t "get" my concern at all. Now I wonder if I should continue to buy from them.

  • wash98052

    Denny, I was on CompuServe for years. I took my email to AOL (when my family insisted—rightly–that clients would never remember my 9-digit numerical Cserve address). Cancelling AOL (when free Yahoo came along) was like escaping 3-headed Cerberus (the bastards would never let go, it seemed); I know people still aboard this now-inferior service because they were hounded trying to get free.

    I’ve had Yahoo for years, now. Plus free accounts on Hotmail and Gmail (for client reasons). Yahoo email was fine till a few months back when they “re-envisioned” the free service so that—despite its cloud presence for 1000s of my archived emails—using the thing has become @#$%&, compared to the prior incarnation. I assume this change resulted from the present CEO’s ambitious fiat. I recall no promises email would return to its better, former form, if I start paying.

    However, saying Yahoo makes no ad $$seems not entirely accurate. The site is has plenty of “Sponsored Links” and the like plus “Ad topics that might interest you,” not to mention various advertising links such as plenty of “Ad Choices” amid the various “news” stories. Dunno about new advertisers.

    Pay-to-view Yahoo service will lose them cheapskates like me, so long as Gmail, Hotmail, et al are freebies. But your notion of using the user lists in a well-informed way to build bucks makes some sense to me, despite popular no-no thinking on that.

  • Ben Gay

    Denny, If I were as smart as you, I could’ve written this article word for word! As usual, when it comes to sales & marketing, you are spot on!

  • mikewrite

    Yahoo’s lack of a revenue-generating business model is the reason I’ve steered clear of their stock.

  • TMD

    Being not familiar with Mr. Hatch’s body of work, accomplishments, accolades, education, background or hands-on business experience I question some of his thinking, to put it politely. There may be some true value in many of his ideas but I fail to understand the animosity and drama he displays. That a business model can be out of date or in need of reconsideration is without argument practical and sensible. Conversely that a baby should be thrown out with the bath water is questionable, unless of course one wants to dispose of its future. Rather than begin a debate of no small magnitude may I remind him that the general course of history shows adaptation of new technology based on preceived benefit, not to mention competition. What better way to start a solid promotion that to give away tangential "gifts" until necessity dictates otherwise? Perhaps the term "loss leader" would refresh those days of old when referencing consumer purchasing patterns. This is not to say humans as creatures of habit don’t continue to respond in a set pattern once trained. For example, there are many among us who only buy on sale, knowing that eventually that product or service will be offered some time in the future and in that fashion. Granted and far way from "free" the seed of that mentality remains planted and conspires to produce predictable and repetitive outcomes time and time again. As in the case with cable television, its first promise was commercial free viewing. I think we all know where that went and very much predictably I might add. In summary, I for one won’t worry about the monetization of internet "free" services because I know factually having lived this long in the USA history will later show this free-dom to be passing. Enjoy it while you can, the nature of the beast being what it is.

  • Hypnotherapist

    It’s not true that Yahoo! has not generated any income last year. I have a "paid" email account, and I was so pleased with that service that I now have a web site hosted by Yahoo. When my email crashed in December and was down for more than a month, I vowed to not renew my paid email, and to get someone else to host my web site, but I couldn’t find anyone else’s service that was better. Now that things are up and running again, I found my loyalty to Yahoo was still there, and I’ll continue to stay, and perhaps add another web site or two! I wish the Company the best. Their search engines (including AVG) are the very best online now – in my opinion – and I’ve got an advanced degree based in research. When I am in a hurry, a key word search is still my favorite, and the quality of sites Yahoo pulls up are the best. I don’t know anyone who works at Yahoo, so know this comes from my own experience and I "owe" no one anything. Three cheers for Yahoo!!! Long may your reign!!!

  • Ricardo Vidallon

    Some year’s back I traded congratulatory emails with a young developer named Pedra who was leaving Google to join a new fledgling company called Facebook. He was tired of sitting in week long meetings trying to decide what shade of blue should be used in a newly created Google app. Guess who his boss was? Well to put it another way… she no longer works there. After the dust settles… at the very least Yahoo got a new logo out of the deal.