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

imageSo 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 new — and significant– revenue 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 sales — which 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 page — or eventually from the home page. Can’t speak for other web users, but that’s not something that I’d pay for.


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