Yahoo-eBay Shotgun Wedding

Yes, fine, the Yahoo-eBay alliance is a "win win."  Amid all the delirious cheering, though, it seems worth noting that it's also a "Because we're getting our butts kicked." 

What I wonder:

1. Now that they are thick as thieves, could eBay be persuaded to flip Skype to Yahoo?  I haven't heard diddly about Yahoo Messenger for Voice, and Skype is still going gangbusters.  I don't care what eBay says--Skype would still be much better off merged with the Yahoo communications suite than the eBay commerce and payment platforms--and as a Yahoo mail and Skype customer, I'd like everything in a single package.
2. Could Jeff Bezos ever be convinced to put himself out to pasture and sell Amazon to eBay?  The two companies are pretty much in the same business now, and eBay would benefit greatly from Amazon's design, distribution, and merchandizing expertise.  With its limited cash flow, Amazon is severely constrained in the Google-inspired investment arms-race, and one wonders how long it can keep up. 

Disclosure:  I own both eBay and Yahoo.  And Amazon, for that matter.

Comments

[SanMan]

Hi Henry,

Can you elaborate a little on "Sell Amazon to eBay - The two companies are pretty much in the same business now.."?

I see some overlap, but isnt the major portion of AMZN's revenue realized by warehousing and efficient distribution? To my knowledge, ebay is simply a marketplace which brings buyers and sellers together (which is a small part of AMZN's biz).

Will be interested to know your (and/or other memebers') thoughts on this topic to a greater depth.

[KING TROLL]

FUCK! I I GOT TO THE BATHROOM AND this sanman asshole beats me.

Second!

Two today Henry! Good job bro

[KING TROLL]

let me note that I will br trying out yahoo phone call system and will report back how it is.

I love the new Yahoo mial.Its a slimmed down outlook email.

[Steve D]

Absolutely, eBay should buy Amazon and make it its fixed price new/in-season brand instead of developing its eBay Express brand from scratch. Amazon, already, gets 30-35% of its revenues from third party sales and even more % when it comes to profit and cash flow - so that part should be kept. As for the rest, eBay-Amazon could sell electronics business to Tiger Direct or someone and instead of running it by themselves, they could just run website. Same thing could be done with books/dvd/cd - sold it to Borders or BN. I think Yahoo/Ebay/Amazon merger is the most strategically right way for all three companies.

[Steve D]

I think Yahoo benefits very much in this partnership. If it’s what they are planning to do, it’s very powerful for them. Imagine, they will have something what no other single advertiser has in entire US. By using user’s purchasing data from eBay, they will be able to sell advertising not by geographic region or gender, but by shopping habits. Imagine you are an advertiser and you want to display your banners only for those users who bought an iPod in the last 6 months. eBay will provide that data to Yahoo. And advertiser will target his iPod accessories to only those who bought an iPod. That’s the power of the Yahoo-Ebay partnership from Yahoo’s perspective. Given how much eBay itself can benefit from Yahoo, it’s no brainer that full scope merger is just a matter of time. I view this current partnership (limited to US only) as a proof of concept phase.

[KING TROLL]

What happen if Google buys Amazon and Myspace? Game over at that point?

[Steve D]

Interesting words from Google about eBay:

SANTA CLARA, Calif. (Reuters) - Google Inc. Chief Executive Eric Schmidt said on Thursday that the Internet industry benefits from a healthy eBay, and sees closer ties ahead between the online auctioneer and his own company.
"Our relationship with eBay is only going to get closer over the next year or two," Schmidt predicted during an interview at a Goldman Sachs investor conference in Las Vegas.
The top executive of the world's leading Web search provider said the alliance between eBay and rival Yahoo Inc. was healthy for the industry and not necessarily a loss to Google.
"The Yahoo-eBay deal is a very good deal and I think all of us benefit from having a stronger eBay," Schmidt said, adding that: "EBay is one of our largest customers and partners."

http://news.moneycontrol.com/india/news/technology/googleseesclosertiestoebaydespiteyahoodeal/resultsviewsipomfinsurancetaxnriinterviewsceocommentspressreleases/market/stocks/article/5447/999999

[Still Inside]

With respect to how EBAY will come out of the Search Wars, there's a Bear and a Bull case to be made.

EBAY Bear:
In an war of one-upsmanship between the major portal players, the Big Three could gradually include virtually all of EBAY's feature set, and offer the services for free (because they have the paid search model to pay the bills). In this scenario, EBAY is essentially "zeroed out" of revenues because they need to charge money for something competitors can give away for free. The specific near-term examples are GBase and GPay.

Bear Counterpoint:
GOOG's GBase looked threatening at first, but now it appears to have two strategic flaws:

1) The very fact that EBAY charges for listings is a significant value to the end-user and the freeness of GBase is usually a bad thing for end-users (buyers) not a good thing.

2) The obvious threat to EBAY from GBase is that GOOG would connect its core search results to GBase. However, doing so would be financially impossible if GOOG kept GBase free since it would immediately shift advertisers away from paid search. If they started charging for GBase listings they would be competing with EBAY on a level playing field where EBAY's head start would be insurmountable.

As for GPay, EBAY's PayPal is nearly impossible to catch unless they gave away the farm to generate new accounts. Perhaps the GOOG guys were going to do just that until they figured out that profit margins are important to those stock holder people.

EBAY Bull:
EBAY can do more deals like the one they did today with YHOO, including deals with GOOG themselves. By holding the threat of making a deal with MSFT, EBAY can cut a sweet deal with GOOG instead. And vice-versa. At the same time.

EBAY's PayPal is a monster machine that is on its way to becoming another world-wide financial fixture along with Visa, Mastercard and AMEX. The importance of long-term brand name, the depth of the vendor relationships and the complexity of the business in general make PayPal uncatchable by any business alive today.

Bull Counterpoint:
EBAY's tight operating history and its very widely held ownership structure means the company is run on the edge of a knife at all times. They can't miss their numbers by even a little bit lest the management team be thrown out on their ear.

As such, even if GBase is not an EBAY-killer per se, it might be able to gobble up some of EBAY's low-end enough to mess up the numbers, which in turn could create a bad situation for EBAY and potentially throw the company into turmoil. Like the Cold War, the actual Doomsday doesn't need to come. The threat of such can drive strategically poor decisions that will be difficult to deal with in the long run.

PayPal might be unstoppable (I can't find a Bear case ANYWHERE for the PayPal business), but in a tight spot desparate stockholders might force the management team to break up the company and sell off PayPal separately.

SI

[Jeremy Johnson]

The bear case for PayPal is that every serious seller hates it and only use it because its the only game in town and buyers have a preference for it.