My friend Ashkan Karbasfrooshan recently wrote a fascinating article wondering whether Google should buy Yahoo!. In an email, he wondered about my position on this topic, so I thought I would take a whack at it, speaking as an ordinary investor. [On the other hand, if you're serious about investing, you should ditch my article and read Jeff Matthews' series of long articles about his pilgrimage to Omaha to observe the world's greatest investor - yes, he (Jeff) isn't making it up!]
For what it's worth, I think there are good reasons why Google should consider this idea seriously:
1. Stock price: In my opinion, Google is overvalued and Yahoo! is undervalued at this point - making it the perfect time to buy market share (and traffic) at a low price.
2. Traffic: Yahoo! still outdoes Google in pure traffic. And the quality of the traffic is intrinsically different. The predominant portion of Google's traffic comes from its flagship search engine site. Is this traffic defensible? Since the cost of switching is trivial for individual users, there's no lock-in and little loyalty. Remember Alta Vista? How long before someone comes up with a better mousetrap [i.e. search algorithm]?
At the same time, Yahoo! has really broad, deep content, which makes it far more defensible IMHO. Content really is king!
1. Culture: Looking from the outside, I imagine that the cultures of these two companies are quite different!
2. Anti-trust concerns: Will the DOJ cause hang-ups on issues of search monopoly?
3. Financials: Will the numbers work? I have no idea - I'm no corporate deal-maker. (Ashkan's post throws some light on this issue.)
A rant about Google's search
Is Google peaking in Search? A couple of search events this week made me consider this possibility.
First, Google's Marissa Mayer gave a wide-ranging talk about the Future of Search, highlighting eight initiatives that Google is focusing on to improve search. All of these search improvements seem to be incremental - honestly, which of these eight are truly revolutionary?
Second, I had the opportunity to attend the blogger/tech-media event at much-hyped search startup Powerset. By implementing natural-language processing techniques, Powerset has the potential to improve the relevance of search results radically by matching the semantics of the content in its index with that of the query. This is a great example of an approach that, if effective, will certainly offer more than incremental improvement!
It remains to be seen if a Google-killer will emerge soon in the world of search; if history is any guide, we should see long periods of incremental development, punctuated by sudden, unexpected, discontinuous changes.
I for one, would welcome our new search overlords from Googhoo!
[Disclosure: I have no positions in either Yahoo! or Google.]