Sunday, 22 July 2007

Should Google Buy Yahoo?

Robert Young at Publishing 2.0 argues that Google needs to face facts and finally kick down for Yahoo. Why would Google pay for a second rate search engine and a bunch of Web 1.0 apps?

Because Yahoo has a lot more on the ball than just a bunch of outdated applications, like Yahoo Mail. While Google continues to dominate search, Yahoo has won a significant number of online battles with the search king:

* Yahoo! Mail, which accounts for almost 50% of the free email market, has more than 10 times the market share of Gmail;

* Yahoo! Answers is a major hit… Google Answers failed;

* Yahoo’s Flickr is a runaway hit… far outpacing Google’s Picasa photo site;

* In critical verticals, like finance, Yahoo remains the clear leader despite much effort by Google;

* Both Yahoo! and Google are cozying up to the newspaper industry with their respective efforts. Combine the two efforts and a successful outcome for all parties is almost guaranteed;

* Want to acquire display/brand ad expertise? Forget DoubleClick — Yahoo’s ad sales expertise and relationships with big Madison Ave brands and agencies are far superior. Besides, as long as Google’s going to get scrutinized under federal antitrust regulators, and now Congress, might as well go through all that headache with the promise of a much bigger catch at the end.

In short, Young's argument is that Google's search and AdWords juggernauts would only serve to propel Yahoo's strengths, while pushing Yahoo's inferior search platform out of the picture.

My biggest beef with Young's argument is the threat of regulatory backlash. Right now Google looks like it could face a fight to finalize its deal for DoubleClick. If Google faces this much resistance to buying DoubleClick, how much more friction would a deal for Yahoo create? I think this proposed deal could be the first major acquisition in the last few years to actually face the threat regulatory intervention, which is probably a sign that it makes great business sense.

What do you think? Should Google just buy Yahoo? Or is this deal impossible in the current regulatory and business environments?

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