Yahoo! is revamping its popular and controversial auction service, removing offensive and racist material altogether and introducing a scale of fees for those that wish to sell an item.

The obvious connection to draw is that Yahoo's hand was forced by the recent French court action regarding Nazi memorabilia. That ended with the French judge threatening to fine Yahoo! 100,000 French francs a day (£10,000) for every day it fails to block French users from accessing its US site.

Of course, Yahoo! denies that this was behind its decision to not only block Nazi stuff but also Ku-Klux Klan memorabilia and, by extension, other such race-hate material. And we reckon it's telling the truth - to a degree.

The imposition of a sliding scale of fees from 20 cents to $2.25 for items put up for sale (the fee will be based on start bid price and minimum acceptable price), only confirmed our suspicions.

This decision looks seriously like the holy grail of Internet business models - a sustainable, profitable Web site. So much water (mostly in the form of cash) has flown under the bridge since the early days of the Internet that people have almost forgotten the initial mantra: build an online presence and get a large customer base by throwing money at the Net, then start charging for your service and hey presto! Profit.

Can this really be the first example of an Internet giant taking the plunge and going this route? After all, there are still plenty of free auction sites and Yahoo! itself still offers a free classified service. Won't all the customers run away in fear? Or do we finally have Web-based customer loyalty?

The reason Yahoo! dropped race-hate stuff in this context is that they got it a bad press and people didn't buy the free speech arguments put forward. An economist would call it "market forces". It seems to think that people will stick with Yahoo! auctions because they know and trust it. If this works and Yahoo! ends up making a financial success of its auction service, we may be looking at the first sign of the Internet becoming a mature medium. ®

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