Is a Google-Yahoo merger any better?

Is a Google-Yahoo merger any better?




The hostile bid by Microsoft to buyout Yahoo for $44.6 billion has prompted a lot of wild speculations for other players, including the Valley giant Google. In essence, the big G is one of those who can afford to buy Yahoo but US anti-competitive laws will obviously not allow it. Let’s just say for a moment that it’s a viable exit option for Yahoo, what does Google stand to gain?

In 2007, Yahoo had gross revenues of $6.969 billion with a net income of just $660 million. If Google pays $44.6 billion for it, that’s 67.5x Yahoo’s annual income or roughly 68 years before they got their money back (if they allow Yahoo to run separately).

The problem with a Google-Yahoo merger is that it’s too redundant — Google is buying something that it already owns (with some existing products and services that are far more superior). It’s like buying another 4 cubic feet mini-ref when you already have a 20 cubic meter walk-in freezer just to sell more ice.

Here’s what Google will be paying for that it already has:

Photo Sharing. Google will be forced to choose between Picasa and Flickr. Both do not generate any income for the company so it doesn’t matter. If everyone agrees Flickr is the more superior product, then it has to dump Picasa which it already spend for. Investment down the drain.

Email. Yahoo! is the more popular and is 3 times bigger than GMail. Their combined account would be huge but Google will have to choose which one to retain and drop. If it favors GMail, then it paid for Yahoo! Mail just to drop it.

Search. Google is far more superior than Yahoo! search so it’s buying a technology that’s second rate and will just dump it again.

eGroups. Google Groups or Yahoo! Groups? Since the latter is bigger in size, Google stands to gain in combining both lists.


 

Maps. Google Maps is way better than Yahoo Maps. Again, Google’s gonna spend for something it already has.

Instant Messenger. IMO, IM-ing is a cultural thing. Some regions like MSN, others love Yahoo. Very few are sticking it out with GTalk. Maybe interconnecting them is much better than dropping one and moving the other.

Finance. Google Finance or Yahoo Finance? My bet is on the former and Yahoo Finance will be drooped. That’s another revenue source dumped.

Then, there are products which Google has previously abandoned or will likewise do so after acquisition:

Answers. Google dropped Google Answers while Yahoo! Answers is doing really good. Will Google trackback its original stand that “Answers” is a failure project or it will also drop Yahoo! Answers eventually?

Directory Listing. Businesses are paying big bucks to Yahoo to get listed — $299 for regular sites and $600 for adult sites. However, Google doesn’t like paid links so it’s gonna just kill it outright.

Domain & Hosting. Yahoo is prolly one of the biggest web host out there. If Google gets the hosting business, will it charge or give it way for free?

There’s just too many overlaps between the two that it’s financially unreasonable for Google to acquire Yahoo for $44.6B. My guesstimate is that only 30% of Yahoo’s business is usable/profitable to Google. Even if one reasons out that it’s the additional “Search” market which Google is after, despite the fact that Google Search is already eating way from Yahoo Search year after year, it still is a pricey investment.

Yes, for the end-users, Google is a better buyer than Microsoft. But business-wise it’s the Google stockholders that will suffer from it.



Abe is the founder and Editor-in-Chief of YugaTech. You Can follow him on Twitter @abeolandres.

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28 Responses

  1. Google will benefit from Yahoo’s loyal customers that uses its various services as a portal website. But google will definitely maintain its search algo and might use it, as well, in Yahoo Search.

  2. I would agree with you Yahoo merging with EITHER company is not good, business-wise. If Yahoo merger with Apple now that would be high profile news.

  3. vance says:

    Yahoo is doing everything it can to stay alive. There are rumors of yahoo’s ceo quitting, 1200 people getting lay off, etc…

    I doubt either company will buy Yahoo..

  4. ChrisMo says:

    Yahoo execs says that it the MS bid undervalues the true value of Yahoo, although experts agree that Yahoo benefits from the purchase.

    In googles case, if it buys yahoo, it would just Kill it or make a power portal. Like a Google Portal perhaps, but that’s too much power for google. Perhaps if Yahoo has some development ideas under wraps, then that’ll be the surprise…

  5. iris says:

    my take on the google-yahoo merger: they don’t necessarily have to “liquidate” one service if both looks like it’s widely used and profiting. like the email services. the point of merging 2 big companies is really to be the dominant player in the field right? so why risk losing millions of users for the sake of merging? maybe they can do that for non-profitable services like the flickr and picasa. same goes for the microsoft-yahoo merger.

  6. rhoen says:

    should the merger push through, will they make it to number one? microsoft wants to buy yahoo because they knew their windowslive couldn’t topple either yahoo or google.

  7. well…if microsoft want to buy it coz they want to be the best and make a lot money

  8. LiNTEK says:

    monopoly doesn’t make things better in the web……

  9. Al says:

    “The hostile bid by Microsoft to buyout Yahoo for $44.6 billion has prompted a lot of wild speculations for other players, including the Valley giant Google.”

    Hostile BID? There’s no hostile bid yet… you don’t know what you are talking about man.

    “A takeover would be considered “hostile” only if the board rejects the offer, but the bidder continues to pursue it.”

    Google did not reject it yet pending board meeting or resolution :).

  10. eligio says:

    i want to see microsoft merge with yahoo, Hope they merged and can introduce something better and more profitable than Adsense, that would be something for us as webmasters to celebrate about. :D

  11. yuga says:

    @Al , you should read the news more often, man. It’s all over.

    ————-

    Microsoft’s big bid for Yahoo | CNET News.com

    Feb 1, 2008 – Google calls Microsoft’s ‘hostile’ bid for Yahoo troubling. A Microsoft-Yahoo merger could threaten the openness on which the Internet is based…

    ————-

    Google Drives Microsoft’s Hostile Bid for Yahoo – GigaOM.com

    ————-

    Official Google Blog: So Microsoft’s hostile bid for Yahoo! raises troubling questions.

    ————-

    If you’re not familiar with the term “hostile bid”, how’s “unfriendly attempt to buy” sound? Let me help you with the definition — “A hostile bid is an attempt to acquire control of a target corporation, usually via a tender offer or unsolicited proposal that hasn’t been agreed to by the target’s management. – McGraw-Hill”

  12. Andrew says:

    He had me at “Google did not reject it yet pending board meeting or resolution.”

    Get your facts straight dude.

  13. vance says:

    Although Google will benefit in some ways.. Won’t you love to see Flicker integrated to Picasa??? that would be very interesting to see..

  14. BrianB says:

    Al means “hostile takeover.” This is still in the Hostile “Bid” phase.

    I bet the Yahoo board would embrace Microsoft. Their earnings aren’t nearly as good as the offer. They’ll never earn that much money in twenty years.

  15. BrianB says:

    @vance

    What I really want to see is a Google Earth and Picasa interface where you get to take snapshots from google earth and archive it in Picasa. The earth is changing.

  16. Dara says:

    Yes, many of the services would be pointless for Google to acquire. Microsoft, being traditionally a software-based rather than web-based company, will have a hard time keeping up with Yahoo’s web-based services, in my opinion.

  17. JP Loh says:

    You’re right. But what if integration was also considered on the various products? For example, a Google Account and Yahoo! Account integration sounds nice. They don’t have to just pick one and drop the other.

  18. Lyle, RN says:

    I don’t like the idea of Google and Yahoo merging.

    I think having both companies as separate entities is more beneficial in terms of competition to offer better services to the computing public.

    As to Microsoft buying Yahoo, not too beneficial IMO either.

    I like the idea of having 2-3 choices for search, e-Mail, IM, and portal.

  19. vance says:

    @brianB that will be nice.

    As a fantasy won’t it be nice to see a unlimited Google storage and gmail account and maybe google video since Yahoo offers this already.

  20. not a good idea kasi it would result into monopoly.

  21. Gian Paolo says:

    Microsoft trying to take over the Net is not good.

    A Google-Yahoo monopoly won’t be helpful, either.

  22. earncow says:

    Not sure lol Google just asking to help yahoo microsoft trying to get own yahoo. Better is google

  23. Cliffordx says:

    Skynet will buy Microsoft, Google, Yahoo, et. al… that’s in the future maybe 2015 and ‘skynet’ is just a metaphor he he he

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