If Facebook teams up with Yahoo, who wins and who loses?
That's the question today after the Sunday Telegraph in London reported that Yahoo CEO Marissa Mayer is talking to Facebook COO Sheryl Sandberg about uniting the companies' search and social-networking into an online behemoth with more than 1 billion users. That infusion of traffic could give a major boost to YHOO's search, help it recruit top-level developers, and even pose a real competitive threat to Google.
FB, meanwhile, has wanted to grow in search to monetize its huge footprint, so the deal could be a win-win for the two companies. The big loser could be Microsoft, which currently has a deal to power YHOO's search with its Bing service. According to the Telegraph, Yahoo hasn't been totally happy with the agreement.
Traders have already been sensing that something was up. FB has climbed 24 percent over the last month, and YHOO is up 12 percent in the same period. GOOG and the S&P 500 are both down 7 percent, while MSFT has fallen 10 percent.
Yahoo spending capital to re-enter the search market is as large a mistake as Kodak trying to enter the printer business and wasting billions or someone deciding they are going to challenge Coke or Pepsi.
Yahoo needs to go do something new. Something they can do cheaply and generate great investment returns.
Fortunately, this is Yahoo and even MM can keep it from doing what it does best. Wasting shareholder Money.