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P.S. YahooBay

Posted on Friday, May 5th 2006

Few months back I wrote YahooBay. In the last month, eBAY shares have dropped a great deal. The core auctions business is slowing, and under threat from Google. So far, Paypal continues to grow by 30%+, but if Google launches a payment platform, that business will also go through jitters. The stock will definitely tank further. Skype hasn’t kept up with forecasts so far, hence, has not been the white knight.
eBay needs to be in search & content, monetized via online advertising, but it isn’t yet. Instead, it pays huge ad dollars out to Google.

And for Yahoo, also, adding the stronger e-commerce business would be healthy, while keeping the huge ad revenue off Google.

And if not, there are literally dozens of search startups out there right now that specialize in this, that and the other kinds of vertical search. It’s time for eBAY to go shopping again.

They should also put in place an advertising business ASAP, which can tackle a lot of the growth concerns. Their merchants, to differentiate, should be able to buy contextual advertising a la Adwords. For this, they need an Ad Management system like Adwords, as well as an Ad Sales Force.

eBAY’s DNA is staying relentlessly focused on their core business model of auctions. All this other stuff, especially selling Ads, will require a shift. Can they do it? Unclear.

At this point, their story is no longer resonating with investors. Lot of questions remain. Long term, it’s still a good business, but to become an attractive investment, it would have to take some major steps into unknown territories. I would have liked to see the first real step they did take (Skype) to have been a different step. The money they spent on Skype needed to have been spent on building their online advertising presence.

As it stands, it looks like an expensive misstep.

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JP Morgan Report on YahooBAY:
https://pull.jpmorgan-research.com/cgi-bin/pull/DocPull/653-E579/71432504/Large_Cap_Internet_Courtships_22_05_06.pdf

Rafat Ali : https://www.paidcontent.org/large-cap-internet-courtships-do-they-make-sense/trackback/

Sramana Mitra Tuesday, May 23, 2006 at 11:33 AM PT

[…] Read this analysis from JP Morgan on why Yahoo and eBAY should merge. I have been advocating YahooBAY for months. My first piece on the topic was written on October 26, 2005. A month back, WSJ did a lengthy piece on eBAY’s conversations with Yahoo and MSN. […]

Sramana Mitra on Strategy » Blog Archive » JP Morgan Says YahooBAY Tuesday, May 23, 2006 at 5:32 PM PT