Inside Yahoo!'s Shopping List

I don't want to see Yahoo! (NASDAQ:YHOO) overpay for MySpace. I made my case yesterday. Now, in an effort to be constructive, I'm going to take a look at some of the companies that the dot-com blue chip should be considering.

I'm going to limit this list to public companies. This doesn't mean that some juicy privately held sites such as Facebook, Digg, Wikipedia, or WordPress wouldn't look stunning hanging on Yahoo!'s arm. However, by limiting myself to public companies, I have access to recent financials and current market valuations.

So let's dive right in to look at a few attractive candidates.

CNET Networks (NASDAQ:CNET)
This is a close match to the content infusion that Yahoo! covets. Yahoo! has been trying to matter in areas such as consumer-electronics reviews and food, music, filmed entertainment, and other lifestyle niches. CNET boasts juggernauts including CNET.com, Chow.com, MP3.com, and TV.com.

The CNET family also boasts video-game giant GameSpot, coding techie haven TechRepublic, and legal-software hotspot Download.com. And I'm really only scratching the surface.

CNET isn't perfect, but it does attract 144 million unique monthly visitors. That isn't far off the mark from the MySpace draw, yet CNET's $1.3 billion enterprise value makes it a relative bargain with the luxury of niche-specific sites that sponsors crave.

The Knot (NASDAQ:KNOT)
Wedding-planning site TheKnot.com has a lot going for it. If Yahoo! is hungry for high-paying leads, it's hard to match the lucrative conversion possibilities of pandering to nervous brides-to-be who are willing to fork over a ton of money on that special day. Wedding dresses, banquet-hall rentals, and honeymoon suites aren't cheap, you know.

Currently trading at 37 times next year's profit projections, The Knot isn't cheap, either, but the upside is huge, especially if Yahoo! can add to the 3.2 million unique monthly visitors that The Knot is currently drawing. The incremental traffic could be substantial, since Yahoo! already runs one of the Web's most popular online dating sites. Tying the knot with The Knot would provide an easy transition for the dating site's success stories.

Marchex (NASDAQ:MCHX)
What's in a name? Plenty. Marchex owns more than 200,000 domain names. It has been slow to develop them, but even in rudimentary form, the company's collection of sites was drawing more than 30 million unique visitors a month by the end of last year.

There are several other businesses in the Marchex family that would serve Yahoo! well, but monetizing and nurturing the type-in traffic of a primo dot-com real estate mogul would be a quick way to make this particular deal pay off quickly.

Rediff.com (NASDAQ:REDF)
Yahoo! has had some sweet successes overseas. Even if it had to do so through minority stakes, Yahoo! Japan and China's Alibaba have given the company footholds in important markets. Taking in Rediff would make Yahoo! a news-driving force in India, the world's second-most populous country.

Earnings more than tripled at Rediff this past quarter, with online ventures in India bringing in 75% of the company's revenue. Trading at 40 times forward profitability, Rediff isn't cheap, but the growth -- as well as the prospects for an improving economy in India -- make it a compelling overseas play.

Hollywood Media (NASDAQ:HOLL)
The owner of Hollywood.com is making a bigger splash three time zones away. Ticketing services at Broadway.com now account for 85% of Hollywood Media's top line. Snapping up the company -- the cheapest of the six names on my list -- would help Yahoo! diversify from its paid search stronghold.

Bankrate (NASDAQ:RATE)
It's not easy for me to admit, but Jim Cramer is right. The colorful CNBC star was right last year when he recommended that Yahoo! buy Bankrate and The Knot, as well as three other entities that aren't on my list.

Bankrate would make for an appealing purchase. The site is the leading publisher of interest-rate information. When you can get financial institutions to pay dearly for a hyperlink to your site, that's an enviable model worth holding. In the same mold as The Knot, this is a way for Yahoo! to bone up on quality leads in high-paying categories.  

Add it up
This isn't the first time I've attempted to play matchmaker on Yahoo!'s behalf. I tried being cupid two months ago, after the company's lackluster report and initial disappointment with its paid-search enhancements. Three of the six names on that shopping list remain.

The difference this time around is that Yahoo! is clearly out on the acquisition prowl. The six names this time fill legitimate gaps in the Yahoo! franchise or reinforce the company's strengths. As we are finding that content is king, Yahoo! needs to step things up in high-paying content areas (wedding planning, personal finance, tech, event ticketing) and increase volume (as it could through Marchex or Rediff).

I've also taken a thrifty approach. Load up the cart, and what do you have? Well, it's a lot less than the $12 billion-plus price tag for MySpace that got lobbed about yesterday.

Now, I don't expect Yahoo! to shell out for all of these names. I just want to make sure that it's aware of the MySpace alternatives that won't dig so deep into the pocketbook and dilute existing Yahoo! shareholders.

Yes, some of these suggestions are a bit pricey. But with so many bunt singles to be had, Yahoo! shouldn't be swinging for the fences on MySpace when the count is full. That's a dangerous approach that often finds a batter swinging -- and striking out -- on a changeup in the dirt.

Yahoo! is a longtime Stock Advisor recommendation. CNET, Bankrate, and The Knot are picks in the Rule Breakers newsletter service. Take a swing at either premium research product with a free 30-day trial subscription offer. Look at it as batting practice.    

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. 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.