Yahoo-Facebook merger could be win-win
A Yahoo acquisition of social-networking site Facebook could be a boon for both companies, analyst Mark May of Needham & Co. says.
The Wall Street Journal (subscription required) and MarketWatch (both are Dow Jones publications) have reported that Yahoo is talking with Facebook about buying it for as much as $1 billion. Both cite unidentified sources close to the companies.
A Yahoo spokeswoman said the company does not comment on rumors, and Facebook did not reply to an e-mail seeking comment.
May said he has no insider knowledge about whether the reports are accurate or whether a deal is imminent. However, he said such a deal would make sense for both companies. Yahoo's online-advertising platform could double or triple Facebook's revenue, while Facebook's users would be an attractive demographic to Yahoo advertisers and services, he said.
"The demographic is driving growth in innovation online," May said. "As Yahoo releases new Web 2.0 applications, that's a great audience to introduce new products into. They tend to be early adopters."
Yahoo's acquisition of a start-up also could energize its employees, he said. "I think Yahoo's internal culture has gotten a little stale of late. Frankly, for a lot of employees at Yahoo, it's not as fun as it once was" to work there, May said.
Of the reports, Jeff Clavier, managing partner at SoftTech VC, said in an e-mail: "That would be a bold move for Yahoo, which has been focusing on small-scale acquisitions (that they scale from within their network) in the U.S. market for some time."
Yahoo had more than 131 million unique visitors in the United States last month, while Facebook had about 14.8 million, according to ComScore Media Metrix.
Elinor Mills covers Internet security and privacy. She joined CNET News in 2005 after working as a foreign correspondent for Reuters in Portugal and writing for The Industry Standard, the IDG News Service, and the Associated Press. E-mail Elinor.
