Don't you dare do it, Yahoo!
London's The Times is reporting this morning that Yahoo! has been in talks with News Corp.
I'm all for Yahoo! acquiring high-traffic sites, but I can't be the only one concerned with printing $12 billion worth of new shares for a site that News Corp. paid just $580 million for two years ago. Yes, MySpace is worth a lot more than that today. Google
Not exactly winsome over losing some
Yahoo! is no doubt haunted by the ones that got away. Outgoing CEO Terry Semel laments passing on a chance to buy Google for $3 billion four years ago. The company was close to snagging Facebook for $1 billion last year. Regret drives a hard bargain.
However, its memory should also be fresh of some of its costlier hookups. Sites like GeoCities and Broadcast.com seemed like great catches at the time, but they're mostly dead stinky fish hanging mounted on the mantle today.
Yahoo!'s sharpest acquisitions have been its post-bubble Web 2.0 nibbles like photo-sharing site Flickr and social bookmarking specialist del.ico.us. Early bites into fast-growing upstarts provide unlimited upside with minimal invested downside. Absorbing MySpace would be pricey for a property that is potentially peaking.
Hey, I know that Yahoo! could use more traffic. Even if Alexa.com ranks Yahoo! as the most popular site on the planet, more page views translate into more holes to plug ads into. The problem is that social networking has always been a tough nut to monetize. Despite Google's encouraging pledge, this is still a niche dominated by underaged teens with holes in their pockets and little reason to click on ads.
Youth can be a fickle lot, too. The same kids that flock to MySpace had their older siblings flock to social networking pioneers like Friendster and Tribe.net a few years ago. It's not too hard to fathom today's MySpace users graduating to Facebook as they hit college while their younger brethren choose MySpace alternatives like Bebo, Piczo, or any of the corporate-driven attempts to launch social networks.
Really. Sites like Disney
Sweeten the pot, a lot
The steep price may not seem as outlandish as News Corp. throws more of its Fox Interactive Media properties into the mix. Video game hub IGN.com, movie rating site RottenTomatoes, testosterone-powered Askmen.com, and several sport sites offer more concentrated audiences that are easier to cash in on.
However, there are still far cheaper ways for Yahoo! to make a splash in those same areas. I'll be back tomorrow with a list of more sensible companies that Yahoo! should be eyeing at this point.
Yes, MySpace would be nice to have, but we're not talking about complimentary after-dinner mints here. There's a tab, and it's expensive. Even if MySpace's booming video-sharing subsite would help Yahoo! compete with Google's YouTube, it's not worth it. Even if tacking on a social networking site that has amassed nearly 185 million user registrations over the years would cement Yahoo!'s butt to the throne as the king of the cyberspace hill, it's not worth it.
Yahoo! is in a tough spot. Investors saw through the featherweight executive shakeup on Monday night. The stock popped at the open yesterday, but closed lower. With the same regime reshuffled and ultimately exposed, Yahoo! may be pressed to strike a major deal. That could be a devastating mistake.
Whether it's MySpace or a bigger combination with eBay
Learn how to fish, Yahoo!. If nothing else, at least learn how to cut bait.
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Longtime Fool contributor Rick Munarriz really is trying to look out for Yahoo!, because somebody has to these days. He does not own shares in any of the companies in this story, save for Disney. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.