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.