Mythical eHoo! yBay! Combo...

I had some calls today from Wall st. folks that have heard inklings of a combination wondering what I thought about it.

Strategically I think it makes some sense.  Y! has:

• Search or I should say SEARCH!!!
• Huge reach
• Strong internet ad business
• Y! stores (1 of 2 useful ecommerce offerings)
• Y! shopping (2 of 2 userful ecomm offerings)
• Killing it in China+Japan

eBay has:

• Top marketplace (25% of all ecommerce)
• Top payment
• Top VOIP
• Killing it in Europe (not doing so hot in Asia)

The combination would give leverage to the eBay business because there would be one channel it wouldn't have to pay for search traffic from.  The combined business would have a very diversified revenue portfolio and be much stronger internationally as well.

You can push the Y! community/social stuff to the combined eBay/skype/paypal audience and also do some cool things with the various subscription businesses that Y! has mixed in with the eBay assets. (upgrade to platinum mail and get a $5 paypal certificate or 500 skypeout minutes).

The overlaps would be:

• Yahoo! Auctions and eBay (easy - nuke Yahoo!)
• Prostores and Y! stores (nuke prostores)
• Y! shopping and shopping.com (combine these take the best of both)

Financially: Y! ($46B) + e ($55B) = Y!bay (or ehoo!) = $101B vs Google ($115B)

So you'd have:

• yBay! Skype+IM vs. gtalk
• ymail vs. gmail
• yBay! search vs. google
• yBay! auctions/shopping vs. gbase/froogle
• yBay! paypal vs. google payment

Now you have a company that is about the same mass of Google and able to take it on in with some good wind in its sails on a product by product basis.

What do you guys think?

Scot

P.S. This is superfly bad for Microsoft, they need to get in there and bid on eBay if it is for sale.  Come on Bill+Steve - smell that coffee?

P.P.S. Terry retires (it's not a media company any more - i'm off to the Hamptons), Meg does the integration and hands off to either Weiner or Donahue - uses the integration to see who is best manager - Jack Welsh style.  Decker is CFO (fills in for Rajiv). Pierre stays in Vegas playing roulette/blackjack - maybe Jerry joins him?

Comments

[mahlon]

Nice analysis, Scot. Seems to me that Microsoft, Google, Yahoo, eBay, AOL and even Amazon are now overlapping to the extent that some consolidation is inevitable. "yBay" makes sense on paper, though neither one can afford to be distracted by a merger right now.

I think "Googlezon" makes the most sense, if Google can get Amazon's technology and user base in exchange for cash and ongoing R&D and traffic generation.

It's hard to see where Microsoft would play. Microsoft's strategy seems to be directed toward online applications and media, not marketplaces.

[Bret]

A partnership or merger is an interesting idea. There are certainly complementary or overlapping services.

Also, don't forget that Y! owns Kelkoo. As a result, Y! would probably need to kill Kelkoo in favor of Shopping.com. In addition, Yahoo search and pay-per-click is nothing in Europe. But, a combined entity would be a more formidable combination vs. Google in terms of the capability to grow the PPC market share.