You might argue that Google is taking share away from Yahoo little by little and therefore should not spend the $40 billion or so it would take to buy Yahoo. However, the deal is very easy to justify:

  • Google is better at monetizing traffic than Yahoo and would increase Yahoo revenues significantly
  • Without Yahoo on the other side, Google could be less generous with sites such as MySpace and AOL and not have to give revenue shares of up to 100% with large pre-payments
  • Buying Yahoo eliminates an aggressive bidder for the other online marketing properties on the market

The deal could probably be justified on these considerations alone. Add in the large cost savings that would come from severe headcount reductions at Yahoo and it’s a no brainer.

The deal might have a hard time getting through the DOJ, but as the combined entity only represents a minute share of the overall advertising market, a convincing case could be made.

  • Fabrice, your post makes alot of interesting points. Yahoo, a content company, and Google a technology company…that’s like peanut butter and chocolate getting together. This will allow yahoo to focus purely on content and google can focus strickly on technology. In the future, this deal is going to have to happen because neither one will be able to exist without great technology and great content.

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  • I just wanted to say I listen to the interview you did on Venture Voice everyday for inspiration. Keep up the great work.

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