Would an EBay-Yahoo! Marriage Work?

The folks at EBay (Nasdaq: EBAY) and Yahoo! (Nasdaq: YHOO) in Japan spent much of Friday denying rumors that the Japanese arms of two companies are about to merge. Seems a British newspaper reported as much, quoting a high-ranking executive at one of the firms.

The Japanese operations of the two companies are certainly distinct from what goes on back at home, and there’s no reason to believe such a merger would happen on a larger scale, if at all. But it’s always fun to speculate.

So: Is the merger of those two Internet companies such a crazy, far-flung idea?

Strange Net-Fellows

At first, it seems to be a crazy idea. First off, why would EBay want to dilute its almost always profitable business by taking on what traditionally has been a media property heavily reliant on advertising dollars that have done nothing but shrink for nearly two years now?

Yahoo, of course, has its own auctions, though they’ll never be more than an also-ran in the online auctions world; for that matter, no other site will ever catch up to or overtake EBay.

Add to that what would certainly be culture clashes, plus the fact that the two companies approach the Internet from completely different directions. It seems like a marriage destined for doom.

When Terry Met Meg

But there’s something that Yahoo! and EBay have very much in common. Both have been built on the idea that the Web is the perfect medium to bring together far-flung people with similar ideals, interests and desires. In other words, a place to build community.

The importance of community was underscored recently by a study from McKinsey & Co. The study found that Web surfers who take part in community-oriented features on a site — such as chat rooms and product review features — spend more time and more money than those who don’t.

Now, even on this front, the two companies have a different approach. Yahoo’s world is more fractured. Yes, everyone’s together under the Yahoo! sun, but they’re soaking up the rays in their own countries. They might favor the financial pages or the sports or the world news. They might chat, e-mail or shop. But they do so on Planet Yahoo!.

At EBay, of course, the community is much more tightly knit. If you’ve come to EBay, you almost certainly want to do one of two things: buy or sell. Or maybe both. You don’t go to EBay to do research or read the headlines. It’s a commerce site, plain and simple.

And that’s why it makes so much money. (Except, apparently, in Japan, where word is EBay is frustrated by its performance. It dominates everywhere else, and losing in the land of the rising sun is not an option.)

Solid Foundation?

But is that common thread strong enough to build a marriage on? Certainly, there seem to be ways in which the two halves could fit together and make a whole greater than the sum of its parts. EBay would eliminate a major competitor in the auctions field, for one thing.

The result would be a strange creature, to be sure. And who would hold the reins? EBay’s market capitalization is about US$17 billion, Yahoo’s about $11 billion. EBay has been consistently profitable, always growing. Yahoo! was doing both for a while, then got hit by the ad slowdown.

And that might be what would spoil such a marriage, in the end. Both companies have a similar goal: dominating their market, reaping the benefits of being No. 1. But their playgrounds are much different places.

They come from the same side of the tracks, all right, but Yahoo! and EBay would make seriously star-crossed lovers. Nevertheless, we all know at least one unlikely couple that seems to live happily ever after.

What do you think? Let’s talk about it.

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