I'm not the first person to suggest that Yahoo! (NASDAQ:YHOO) and eBay (NASDAQ:EBAY) should shack up. The proposed pairing has been rumor mill fodder for years. However, this morning's partnership to take down borders that divide their global auction marketplaces shows -- yet again -- that the two companies truly are made for one another.
We can argue about who's Harry and who's Sally. I just need one of them to channel Billy Crystal -- stat -- and belt out the obvious:
"When you realize you want to spend the rest of your life with somebody, you want the rest of your life to start as soon as possible."
Shake hands and never let go
The deal? Oh, right. The two companies are loosening the barriers between Yahoo! Japan -- the auction site owned by Yahoo! and Softbank -- and eBay. By next year, it will be easier for eBay users to buy and sell wares on Yahoo! Japan and vice versa.
It's been five years since eBay bowed out of Japan with its tail between its legs. It was too late to the auction party, especially after Softbank and Yahoo! had an early lead in cornering the market in consumer-to-consumer transactions with Yahoo! Japan.
eBay doesn't fail often, but when it does, it's usually at the hands of Yahoo!. eBay recently retreated out of China, where Taobao is the marketplace of choice. Yahoo! just happens to own a 39% stake in Alibaba Group, Taobao's parent company.
It's a perfect fit, right? The two huge international markets where eBay has been spanked silly just happen to be Yahoo!'s strong suits. Even a blindfolded cupid could nail this arrow.
But wait. It gets better.
Taking down Big G
Both companies are on a collision course with Google (NASDAQ:GOOG). Actually, Yahoo! has already had its fender bender with the world's leading search engine. It was an original partner -- and even a pre-IPO investor -- in Google, before Yahoo! was ultimately dwarfed by the faster-growing search engine rock star.
It can happen to eBay, too. You don't see it? Look a little closer. Google Base is a poor man's eBay marketplace. Google Checkout is a poor man's PayPal. Google Talk is a poor man's Skype. Google Products (formerly Froogle) is a poor man's Shopping.com. This may not amount to much in concert, but keep in mind that Google isn't a poor man.
Google is flush with cash. It can monetize websites better than anyone. If Google really wants to excel in one of its pet projects, it will. Right now, that has involved mostly slaying Yahoo! in paid search and digging its claws into Microsoft (NASDAQ:MSFT) in everything from paid search to mobile browsers to Web-based software.
eBay may be on the tactical backburner at Google right now, but it won't be for too much longer. Google's plan is for global domination, and that highway is going to eventually go right over eBay's livelihood.
eBay has two choices: It can wait for the bulldozer, or it can find a like-minded mercenary to attack Google when it isn't looking. Trust me; you don't want to wait for the bulldozer. Rubble hurts.
Two hearts beating as one
What's in it for Yahoo!? Plenty. Yahoo! actually serves up more Web traffic than Google. So why does it command a fifth of the profitability and a sixth of the market cap of Google? Well, a lot of that has to do with the flimsy traffic at Yahoo!
Page views at Yahoo! are typically the handiwork of disinterested browsers blazing through free email inboxes (which, according to Alexa.com, accounts for 47% of the traffic at Yahoo!). Its strength doesn't lie in attracting decision-making info-seekers to its flagship search engine.
That is where eBay fits in. Folks on eBay and eBay's Shopping.com are looking for something to buy. Folks on PayPal are ready to swap funds. eBay is doing just fine generating transactional revenue from these visitors, but what if fee-slashing rivals continue to challenge eBay?
Yahoo! can make the most of eBay's commerce-friendly ways to attract a deeper pool of advertisers, while eBay would be able to play the sponsorship card, if it blatantly became the only way to subsidize shortcomings elsewhere.
Besides, it's not just Google that they're battling. Amazon.com (NASDAQ:AMZN) continues to evolve into more of a community hub, with product page forums and its Askville clone of Yahoo! Answers. Once IAC (NASDAQ:IACI) splits into five, its new media center will be nimbler in attacking the local search market that both Yahoo! and eBay are gunning for.
Let Nora Ephron's words mean something.
"When you realize you want to spend the rest of your life with somebody," she wrote -- and I repeat -- for Harry's character, "you want the rest of your life to start as soon as possible."
Shareholders deserve for the rest of their lives to start as soon as possible, too.
