Bluefly Forges Portal Deal with Yahoo!

In a move aimed at acquiring new customers, Silicon Alley retailer for designer fashions and home furnishings Bluefly Inc. Tuesday announced a deal with Yahoo! to appear in its Shopping channel and in its search results.

The deal calls for Bluefly to receive graphic merchant links within Yahoo! Shopping and be featured throughout the Apparel, Accessories and Shoes categories. In addition, Bluefly’s inventory will appear in Yahoo! Shopping search results.

The renewal of Bluefly’s presence on Yahoo!’s Shopping channel is a big move for a company desperately looking to lower its customer acquisition costs, which skyrocketed to $178.66 during the third quarter of 1999.

Although portal deals like the one with Yahoo! have come under increasing scrutiny for being prohibitively expensive, portals have recently been forced to lower their prices because of the slowdown in online ad spending. Bluefly also has extended similar deals with America Online and with MSN. It inked the latest AOL deal in August, and the most recent MSN agreement in July.

Bluefly’s vice president of marketing Alanna Richter said the decision to extend the Yahoo! deal was made after a close analysis of the performance of Bluefly’s online marketing relationships. “Our experience over the last year has proven that Yahoo! Shopping is a good means for Bluefly to acquire many valuable customers in a cost effective manner,” Richter said.

In the last year, Bluefly said it had tested a variety of marketing initiatives which has effectively lowered its customer acquisitions costs by about 68 percent this year. The company said the cost to acquire customers now stands at $57.45 for the third quarter of 2000, down from $178.66 in the same period a year ago.

Bluefly recently snagged $15 million in new investment dough from affiliates of the Soros Group.

Bluefly shares jumped almost 7 percent on the news this morning, trading at $1.23 in early going. The stock has dropped nearly 90 percent since reaching a 52-week high of $16.50 on December 13, 1999.

– This article originally appeared in Internet Advertising Report sister publication atNewYork.com.