Yahoo to link with two stock trading brokerages

June 1st, 2005

Yahoo users will be able to access stock-trading accounts directly through the Yahoo Finance section.

Stock trading access could also be another strong tool for building user loyalty.

Aiming to take the popular financial news and information pages of its portal to new levels and target an affluent class of users in the process, Yahoo's (Nasdaq: YHOO) Japan subsidiary has announced plans to link with two stock trading brokerages.

Yahoo Japan said it struck basic deals with E*Trade Securities, Japan's top online stock broker, and Nikko Cordial Securities, the number three broker in the country. The details are still being worked out and were expected to be finished within the week, according to reports.

Yahoo did not provide details on how the agreements will work, but it's believed users of the portal will be able to access stock-trading accounts directly through the Yahoo Finance section of the Japanese site. The financial terms were not disclosed, but speculation was that Yahoo Japan would receive a referral fee for all transactions originated through the portal.

It's also not clear whether Yahoo would attempt such a move in the United States. However, there might be a number of arguments why they would. Yahoo's finance page has been one of its most heavily trafficked since its early days as a Web portal and also has proved to be a key source of subscription revenue and other paid services.

Stock trading access could also be another strong tool for building user loyalty, which analysts say is a key consideration for Yahoo and its competitors, who are vying to convince consumers to spend more time and money through their sites.

Yahoo Japan is already ahead of its U.S. counterpart in the financial offerings that users can access. Earlier this year, Yahoo Japan linked with Aozora Bank to offer banking services directly through the portal.

The timing of the Japan deal is interesting given that the U.S. online stock trading market is poised for sweeping changes. Ameritrade has confirmed that it's talking to Toronto Dominion Bank about acquiring TD Waterhouse, a deal some analysts say could create a domino effect and result in additional mergers.

The discount brokerage market is not a highly profitable one, with price wars and sagging demand in recent years leading to tough times for the brokers. However, analysts believe that longer-term trends make the business a sound one, one that portals might at least want a piece of going forward.

Also, while stock trading among consumers has fallen sharply from its peak at the height of the dot-com era, many believe that, too, will rebound. If it does, a consumer portal such as Yahoo might be in a strong position to win a share of the business.

However, whether consumers will entrust what has traditionally been an entertainment and information portal like Yahoo with the type of sensitive financial data needed to complete stock trades might be another question.

Forrester Research analyst Charlene Li told the E-Commerce Times that the rise of e-commerce being done through portals, comparison shopping sites and search engines shows that the third parties can play a powerful role in such commercial activity and are increasingly seen as trusted arbiters of where to go for certain information online.

Meanwhile, the ability to capture stock traders, who are typically high-income and high net-worth individuals, would pay dividends for Yahoo in other ways as well. Luxury goods makers would be more likely to invest in advertising knowing they could reach that sought-after audience. Additional opportunities to sell premium services would likely arise as well.

"The overriding theme is loyalty and keeping users on a portal as long as possible," Li said. The measurement of a site's so-called "stickiness," or how long users stay there, is getting new attention amid the resurgence of online advertising. Since users are already turning to Yahoo for financial news, stock prices and other information, they would likely be willing to stay there to complete transactions.

"Like a lot of other services being added, this could be one less reason that a user of a portal has to leave," Li said.

Source: eCommerce Times

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