Why do customers pay $3 for a coffee they could just as easily get from 7-Eleven for a third of the cost? The reason, Yahoo!’s Tim Sanders said, is that Starbucks is in the business of selling a coffee experience, not just a cup of Joe. For that reason, Starbucks has a market capitalization more than 12 times that of 7-Eleven.
Sanders, the chief solutions officer at Yahoo! , said on Tuesday that the portal took a cue from Starbucks founder Howard Schultz in launching premium services for its 215 million users.
“I do not believe that customers will pull out their wallets and pay for something because it’s a quality product,” he said to attendees at the Jupiter Online Media Conference, which is run by this site’s parent company. “It has to be an experience.”
For that reason, Yahoo! Platinum, launched a week ago, focuses on branded news and entertainment, as well as sports. The rollout of the service was timed to coincide with the NCAA men’s basketball tournament, which Sanders said had drawn many subscribers to Platinum’s live video coverage of games. He declined to specify the exact number.
“March Madness is not something consumers are willing to wait for,” he said.
Calling Platinum a stage for an Internet experience, Sanders said Yahoo! had a number of built in “triggers” that, like the tournament, would draw users to pay for immediate access to compelling video and audio content.
Sanders expects another trigger will occur when NASCAR’s Winston Cup series heats up this summer. Down the road, he said, another trigger would be “American Idol,” as the competition nears its finale.
Although Yahoo! has yet to secure a deal to include them in Platinum, Sanders said both the Olympics in Greece and World Cup in Germany would be the type of content users would pay to access, since both events will take place during peak Internet use at work in the United States.
“There’s a tremendous, tremendous value to real time,” he said.
In addition to real-time, multimedia content, Sanders said Yahoo! targeted services that reduce stress through simplicity, such as the portal’s premium mail service and Web hosting. “Anything you do to reduce stress can be a value proposition,” he said.
Yahoo! has high hopes for its premium services, which CEO Terry Semel has emphasized since he took the reins 18 months ago in the midst of the Internet advertising collapse.
In addition to Platinum, Yahoo! offers a range of fee-based services, ranging from its HotJobs site to personals to high-speed Internet access through a partnership with SBC.
At the end of 2002, Yahoo! boasted 2.2 million customers for its variety of paid services. Semel expects the company will have 10 million customers by 2006.
