I'm not one for conspiracy theories but I do believe that everything happens for a reason. Why am I telling you this? Context. I want you to understand that when I say Facebook and Yahoo!
Ripped from the headlines ... chung, CHUNG!
First, the weekend edition of The Wall Street Journal reported that Facebook had raised $1 billion in funding from overseas investors. Goldman Sachs
Then, just ahead of yesterday's fourth-quarter report from Yahoo!, the Journal's AllThingsDigital blog reported yet another layoff. The company is cutting another one percent of its staff. The reasoning? Um, you figure it out:
"The personnel changes we are making are part of our ongoing strategy to best position Yahoo! for revenue growth and margin expansion and to support our strategy to deliver differentiated products and experiences to the marketplace. We'll continue to hire on a global basis to support our key priorities."
That's what an unnamed rep told the Journal in response to its story. It's the sort of generic, "of course we're doing what's best for shareholders" pablum I wrote all the time as a member of the PR fraternity years ago. (Want an old school peek inside the party house? Click here.)
You know what else it sounds like? Desperation. The sort of we-don't-yet-know-what-we're-doing overreaching that angers employees and depresses investors. Everybody save for rival Google
1. They each live in the display window
Both Facebook and Yahoo! specialize in a market in which their chief competitor struggles. I'm talking about display ads. Facebook uses personal information to put up various displays on the right side of every profile page. Yahoo! has a vast network for placing display ads across the web.
Facebook was on track to earn 9.4% of last year's display ad market, researcher EMarketer reports, a healthy gain over 2009's 6.6%. Yahoo! led the category with 16.5% while Google claimed 6.5%. FaceHoo would put The Big G on the defensive for once.
2. Facebook's winning, but Yahoo! will fight to the end
Yahoo! CEO Carol Bartz last month said that Facebook was her company's biggest competition. She's right. Whereas Google draws in users and then redirects them, Facebook attracts digital loiterers. The average online user spends 59% more time on Facebook than Yahoo!, ComScore reported at the end of last year.
We've known this was coming. Social media is sticky. It's why Twitter is reportedly already worth (at least) $1 billion. It's also why salesforce.com
3. Focus on a common enemy instead
It doesn't have to be that way. Why go on beating each other up, sure, when Facebook and Yahoo! share a common partner in Microsoft
A combined FaceHoo would have one search engine (i.e., Bing), one social network (i.e., Facebook), and one communications platform (i.e., Yahoo! Mail and Messenger). It might also become a home-away-from-home for Windows Live documents and data, since Mr. Softy would surely support a combined strike at The Big G.
Yeah, but how will this work?
Facebook, for its part, already has access to a great deal of capital. According to the Journal's reporting, U.S. investors were shut out of this latest round of financing because opening it up would have created hurdles with the Securities and Exchange Commission (SEC). But even without U.S. money Facebook's round was oversubscribed.
One source told the Journal that the social superstar could have raised at least $5 billion. And remember FaceHoo's joint partner, Microsoft. Mr. Softy alone could pitch in enough moola to complete a deal in exchange for a healthy stake in the combined entity.
Finally, the timing's right. Not only is Yahoo! bleeding but Google is transitioning, booting Eric Schmidt upstairs in favor of co-founder Larry Page as chief executive. When's a better time to put Page to the test? When he's new in the job? Or after he's already faced and beaten a few minor crises? You know the answer.
It's now or never for FaceHoo. All that remains is for Mark Zuckerberg to give Bartz a call and get this deal done. Thing I'm wrong? Have a different take? Use the comments box below to let us know what you think. You can also rate Yahoo! in Motley Fool CAPS.
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