Is a Google-Yahoo merger any better?

The hostile bid by Microsoft to buyout Yahoo for $44.6PHP 2,617INR 3,780EUR 42CNY 325 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 $6.969PHP 409INR 591EUR 7CNY 51 billion with a net income of just $660PHP 38,732INR 55,935EUR 629CNY 4,804 million. If Google pays $44.6PHP 2,617INR 3,780EUR 42CNY 325 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 — $299PHP 17,547INR 25,340EUR 285CNY 2,176 for regular sites and $600PHP 35,211INR 50,850EUR 571CNY 4,367 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 $44PHP 2,582INR 3,729EUR 42CNY 320.6B. 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.