eBay CEO John Donahoe

The thing about corporate turnarounds is that they’re supposed to turn a company around. As in 180 degrees. They’re not supposed to stop halfway and let the company drift sideways. But something like that is happening to eBay: Its long, slow turnaround is, well, turning flat.

For the past couple of years, the online marketplace and payments company has been engineering a return to growth under the guidance of CEO John Donahoe, who took over from Meg Whitman in March of 2008. Donahoe embarked upon an aggressive and risky effort to transition eBay from an auction house for garage clutter to a marketplace centered on larger sellers and fixed-price goods like bulk inventory.

At first, the makeover seemed to hurt eBay’s growth. But last summer, after reporting second-quarter earnings, investors began to believe in the turnaround, sending the stock rallying. But since then eBay’s stock has stalled, rising just 0.3 percent, while the Nasdaq has gained 14.6 percent and shares of Amazon have surged 30.3 percent. Back in January, there were signs that the turnaround was in jeopardy, and further evidence implies that is in fact the case.

According to data from ChannelAdvisor, an online retail services company, same-store sales at eBay declined 4 percent in May from a year earlier, the first annual decline for eBay since last summer. In a post discussing the data ChannelAdvisor CEO Scott Wingo tied the decline to yet another round of changes last March to the way items are listed and priced.

Early on, sellers were reporting that the listing changes in particular were hurting their sales. Even worse, according to Wingo, the new search results appear to be confusing buyers — for some reason (Wingo himself says he’s baffled) serving up many more auctioned items rather than fixed-price ones. Which is sort of the opposite of what Donahoe was going for.

In Donahoe’s defense, Whitman steered eBay from one of the most dynamic and successful startups in the history of Silicon Valley into a fragmented, sclerotic tech company. Her handling of the Skype deal left eBay paying too much for a company that had little in common with its other businesses, and didn’t even buy control of its P2P technology. After buying StumbleUpon in 2007, eBay smothered the innovative startup under its wings. As Om noted recently, StumbleUpon has thrived since eBay spun it off.

I’ve long wondered whether eBay wouldn’t be better off broken up into pieces. If the turnaround continues to fizzle out, I suspect investors will lose patience and agree. Even some who are bullish on the stock because it’s undervalued acknowledge that the company is worth more than the sum of its parts.

If so, why not sell off each piece to companies that can offer more compatibility than the tepid synergy that eBay’s fragmented empire has tried to create? eBay’s marketplace with a global reach would be a tight fit with another retail giant. It’s hard to imagine Amazon making a bid, but the growing Japanese e-tailer Rakuten has been on a buying spree, most recently picking up Buy.com.

Similarly, PayPal might better achieve the ambitions — outlined by Donahoe at the D8 conference this month — of becoming a payment provider for digital content if the subsidiary were bought by a company that was just starting to move into selling and streaming content like music. A company like, say, Google, which right now strikes me as a better partner for PayPal than eBay’s stagnant bulk inventory marketplace.

Whatever value remains in PayPal and other properties like StubHub will continue to be weighted down by the eBay marketplace business — a business that is, according to ThinkEquity analyst Aaron Kessler, continuing to lose market share. If Donahoe can’t jump-start the recovery of the marketplace soon, he may be hearing more calls for him to unlock the company’s hidden value by breaking it up.

Image courtesy of Wikimedia Commons.

By app creep, I mean the collecting (and then forgetting) of software programs. It isn’t new. But on mobile phones, the less popular apps are more visible, even a nuisance –- you frequently flip past pages of them searching for the one you need. It’s less of a problem on laptops and desktops, in part, because of the centrality of the web browsers on those devices. On a smartphone, I use a browser well less than a quarter of the time. But sooner than later, that will change, because as more and more companies offer services on the mobile web, the mobile browser will play a bigger role. Thanks to the advent of HTML5, browsers and  apps will learn to live with each other.

In the meantime, while there may be 200,000 apps for the iPhone and 50,000 for Android phones, but iPhone users have on average just 37 apps installed and Android owners, 22, according to the latest figures from Nielsen. Of course, not all apps connect users to the web, but many of those that don’t contain content that can easily be found online.

Eventually, a spot on the home screens of smartphones will become like beachfront property in Monte Carlo –- highly coveted real estate. Most non-elite developers will find it easier to reach a mobile audience through the browser. But for now, the lion’s share of them are ignoring the browser in favor of native apps, which -– unless they’re a featured or best-selling app in an app store -– often languish in obscurity.

And yet, as Kevin Tofel pointed out a few months ago, mobile apps “are bite-sized, functional chunks of the mobile web” that work so well he has “yet to find a mobile web experience exceeding that of a mobile application.”

It’s helping that, increasingly, mobile browsers are growing more sophisticated. When Apple launched the iPhone, they were still relatively primitive –- merely desktop browsers writ small. But recently HTML5 has been changing that, allowing for some key features commonly found in native apps, such as geolocation APIs, offline storage and more.

Still, HTML5 won’t be fully ratified as a standard by the World Wide Web Consortium until later this year at the earliest. And in the meantime, mobile browsers are incrementally rolling out HTML5 feature compatibility. Visiting html5test.com on a iPhone Safari browser rates it 125 out of 300, on an Android 2.2 (Froyo), 176 and Opera Mini, just 22 (although Opera plans to change this in coming months).

Meanwhile, some companies are starting to tailor web sites for mobile browsers. It took me 25 seconds to type Facebook’s URL into my iPhone’s Safari browser (21 when I used a bookmark). It took me 20 seconds to find the Facebook app and post the same update. I couldn’t post a photo through the browser, and I couldn’t update my profile information. But the basic functions of posting and reading updates are already similar to what the Facebook app provides.

Beyond technology, there is another barrier that mobile browsers will have to overcome: the perception that native apps are the entry point for the web on mobile phones. It’s a message that Apple has driven home relentlessly with its iPhone and iPad TV commercials. But as app creep afflicts those devices and as browser usability improves, consumers may warm up to their browsers more.

Developers have also gravitated to native apps, partly to follow consumer demand and partly because, as Kevin noted, the experience has so far been superior. But developing web apps for a mobile browser has strong advantages in the long term -– among them, avoiding both the need to write for and support multiple OS platforms and the sometimes onerous approval requirements of app stores.

So contrary to what some are predicting will be a stronger movement toward native apps and a marginalization of the browser in the age of the mobile web, I see something different: an eventual balancing out. Native apps will always be on mobile phones, but as a kind of premier gallery of a person’s most beloved ones. Sooner than later, most companies seeking our attention will do so through a browser.

Image courtesy of Flickr user linusil

But as opposed to printed pages and plastic disks, media is increasingly being consumed in the cloud. And there, from a media sales perspective, Amazon is finding much less success.

According to NPD Group, Amazon controls just 12 percent of the market for Mp3 sales, roughly one-sixth of Apple’s 70 percent share. True, Amazon is growing that share, mostly at the expense of smaller rivals like Rhapsody. But it has yet to put a dent in Apple’s dominance.

And thanks to portable, cloud-friendly devices like smartphones and iPads, Amazon is up against tougher competition in movies and books as well. Netflix’s subscription-based iPad app is a much more immersive and intuitive movie experience than downloading a movie from Amazon’s site. Kindle, meanwhile, seems destined to become a niche e-reader. The iPad dulled Kindle’s status as a must-have device. Instead, Kindle’s best hope is as an e-reader app on tablets, where it must compete with iBooks, Nook and scores of other e-book options.

Sales from its media business is central to Amazon’s business model. But media revenue in North America rose 11 percent last year to $6 billion, while sales of electronics and other non-media merchandise grew 43 percent to $6.3 billion. So even though non-media revenue was larger than media revenue, it was still growing four times as fast. In the first quarter of 2010, the trend continued: Media revenue increased 22 percent while non-media grew by 73 percent.

To be clear, Amazon isn’t in danger of being the next Yahoo — a tech giant that lost its way and can’t find it back even with a sharp CEO at the helm. Amazon’s flagship retail site is still the biggest online retailer, and continues to expand its share of the global retail market. It will sell plenty of e-books and Mp3s. And Amazon will remain a crucial player in determining how companies, startups in particular, tap into the cloud for their operations.

But it’s Amazon’s early and deep expertise in cloud computing that makes all the more puzzling its lackluster performance in cloud-based media. Amazon should have been the leading retailer of cloud-streamed media, but instead it’s handing that over to companies that write the OS for the most popular cloud-based devices, companies like Apple and even Google, which may not sell digital media but will try to sell ads on top of it. And that’s a pretty big missed opportunity.

What could Amazon do? Aggressive, smart acquisitions could help — Amazon has $5 billion in cash and marketable securities. But in some cases, its hands are tied. It’s long been suggested — and frequently rumored — that Amazon buy Netflix. It would be a strong fit except that it would open Amazon up to sales taxes in states where Netflix operates. Amazon could also simply rely on its core market of selling printed books, CDs and DVDs. It’s still a big market, but it’s also dangerous to peg your future sales on media formats that are becoming less popular by the day.

But every crisis brings an opportunity. Facebook can emerge from the privacy brouhaha it started a lot stronger than it was before it began. Of course, it won’t be easy and if Facebook fumbles, it will almost surely emerge a lot weaker.

A lack of nuance

The controversy is pushing Facebook into the middle of an unpleasant and messy conversation that has needed to take place ever since the social web began to mature nearly a decade ago. Right now, the debate is about privacy protection but at its heart it’s also about discretion and the freedom to exercise that discretion whenever we choose.

In the world beyond the web we habitually show different sides of ourselves in different situations. But the current structure of the web doesn’t allow for any nuance. Offhand comments can be preserved for decades, to be repeated again and again. Random actions can be tracked by advertisers, and shape how they respond to you. Managing your online persona involves forethought, perseverance and sometimes hard lessons. Right now, the social web is designed as if you have only one identity, when in fact we all have complex and sometimes contradictory aspects to ourselves. Some people thrive in this environment, but for most there’s a learning curve ahead.

Facebook, with its Open Graph, ignored this learning curve, just as it did with Beacon a few years ago. And so it has stumbled right into the thick of this thorny debate of how we manage ourselves online. But precisely because of the company’s central position, it’s ideally positioned to find a way to solve it, and ultimately to profit from it. It has a chance to lead a long-term effort to clarify the privacy issue, and design a broadly accepted social network that can accommodate some of the complexities of human nature.

A broader challenge

But will Facebook seize that opportunity? It’s not looking good. The company held an all-hands meeting last week to discuss privacy protections, but it wants to keep the details of that discussion private. Its insistence that users love the new changes also rings false. Most users are divided between tolerating the changes or being uneasy about features that benefit Facebook and its partners while offering little value to users themselves. There are already plenty of people who have chosen to remain absent from Facebook and social networks in general. Open Graph threatens to add more people to that publicity-shy camp. Instead of becoming ubiquitous on the web, Facebook risks becoming useful to an increasingly smaller portion of the web’s population.

Emerging from its current crisis will be painful. Facebook needs to capitulate, if not to its loudest critics, than to the concerns of its everyday users. For most people, 50 different privacy settings is 49 too many. To appeal to the widest audience as possible, default settings need to keep all user data restricted to users’ friends. The challenge to engineers is then to make customizing privacy controls as intuitive and welcoming as possible. The broader challenge for Facebook’s leadership is to entice us into voluntarily offering more personal information to the web at large.

Some of us are already sharing our lives to the web at large, while many of us never will. But what we all have in common is that the decision of where to draw the line between our public and our private selves belongs to us, and no one else. Honoring that principle will mean Facebook forgoes short-term revenue. But over the long term it’s the surest way for Facebook to reach its potential.

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Whether you think Apple’s efforts to control the iPhone OS environment are helping or hurting, its ability to do so will eventually break down. Control never lasts forever — especially on the web, where entropy seems to be a guiding principle. The question is when Apple’s control will start to break down. I think it already has.

But while my reasoning is partly tied to the broader debate about open vs. closed systems, it has much more to do with a development that’s taken place over the past few months, one that even most technophobic Apple customer can grasp immediately: Apple isn’t just refereeing technical violations like private APIs; it’s refereeing morality.

It started when Apple pulled 5,000 apps from the App Store because of sexual content — though an arbiter of porn, even one with the best of intentions, will always end up with all sides angry with them. Apple’s shifting stance on political satire ignited another brush fire. It banned, then allowed Mark Fiore’s iPhone app; now, any aggrieved yahoo with a rejected app can fashion himself as a First Amendment martyr.

I’m willing to accept that Apple is trying doing the right thing for its customers. In one sense, Apple is like Walmart, or any retailer that excludes magazines and books with content it deems too sexual or politically controversial. But Apple is more than just a retailer — it’s the provider of a platform, and a wildly successful one. Apple can control its platform on a small scale, but as success expands that platform domain, the company’s control inevitably breaks down as it starts to create more problems than it solves.

The problems affect developers, content partners and consumers. To avoid having to explain its capricious approval system, Apple has retreated into an opaque cloud of inscrutability, making telepathy a vital skill for successful developers. As publishers large and small bring their content to the iPad, Apple’s murky morality may give them pause — or worse, lead to self-censorship. And curating controversial content in a way that leaves all parties unhappy is hardly a savvy way to market a hot new product to consumers.

Apple has often demonstrated an ability to be flexible. In January, it eased some controls on the app approval process in an effort to speed it up. It recently allowed Opera Mini into the App Store, an exception to its rule that third-party apps not compete with its native offerings. And iPhone OS 4 will finally concede to longstanding calls for the iPhone to multitask third-party apps.

So the company is likely to reassess its control-freak tendencies as well. It has three choices: One, hold to the status quo; two, curate its platform, but add a set of clear guidelines as to what’s allowed and what isn’t, or maybe a curtained-off section for controversial apps; or three, adopt an open environment where apps are rejected only on technical considerations. The first will only add to confusion. The second might work if the guidelines are explicit enough. The third is the simplest, but involves giving up a lot of control.

My guess is Apple will go for option No. 3. Not right away, but in increments. In the early days of the web, ISPs faced a similar choice and decided not to control what customers could read. Apple will always favor a closed architecture that lets it offer a web experience on its terms. But in time, even its curated experience will look more more like the messy reality we see on the web today.

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Image courtesy of Flickr user herwings.

Google, the company that has redefined advertising in the 21st century, is itself becoming a major advertiser in traditional media. Remember the “Parisian Love” ad that ran during the Super Bowl (a $3 million piece of TV real estate)? Or how Eric Schmidt, in tweeting about the ad spot, joked that “hell has frozen over”? Then there was the Chrome ad on the NYTimes.com, as well as other print ads in magazines and newspapers around the world.

But when hell freezes over, you have to wonder why. Yes, Google launched new products like the Nexus One (to disappointing sales); and yes, its brand takes a hit with every perceived violation of its don’t-be-evil ethic. It also wants to let people know about new twists on search ads like remarketing. But does a company with a two-thirds share of the search market really need to beef up its marketing budget?

Google’s marketing costs have long been around 8 percent of its revenue. Last year, sales and marketing (excluding stock-based compensation) totaled $1.8 billion. Yet in the first quarter of this year, it spent another $553 million, a 47 percent increase over the same period a year ago. Granted, the beginning of 2009 was a bad time to be spending on anything, but that 47 percent rise is more than twice Google’s revenue growth rate.

The question of why Google is buying so many ads was on the minds of analysts during the company’s earnings call this week. When a Bank of America analyst asked about it, a Google executive responded that it was driven by return on investment. Which is a silly answer: All advertising is directed at a return on investment. That’s like saying you’re going into business to make a profit.

What’s more, marketing an ad-driven company has an absurd Ponzi scheme logic to it, a kind of media usury where ad revenue is spun out of ad revenue. Just stop and think about Schmidt’s Super Bowl ad tweet: Here was the CEO of an online ad giant advertising a TV advertisement. If it gets any more meta than that, our heads could explode.

But, as another analyst pointed out on the call, Google is facing long-term threats from social sites like Facebook, where major advertisers like eBay are spending more of their own ad budgets. Jeff Huber, a SVP of engineering, responded by saying that online advertising is growing so fast it’s not a zero-sum game. That’s true for now, but it won’t be for long. Google, of course, has had a number of failed initiatives in social media. And mobile search is not only a clear priority for Google, it’s a fledgling market up for grabs, perhaps by Google’s newest rival in web advertising, Apple.

Google’s sudden interest in buying expensive ads in visible advertising spots may suggest that the company is bracing for a period when its core market matures and growth slows. Coded into those rising marketing numbers is a slight but growing concern about what life will be like in middle age.

Still, at the end of the day, I doubt there can be much return on investment for Google to advertise its search engine and its ad model. Does anyone with web access need to know what Google is, or what it does? If so, I suggest they Google “Google.” Ow — once again, my head hurts.

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My reaction was different. I watched it not as a designer or advertiser but as a consumer, and when it was over I was overcome with a wave of depression. Somehow I’d hoped the future would be less dystopian than what Schell laid out — in particular the notion of games as a marketing tool to corral consumers into desired behaviors. Apparently, I’m not alone. A clip of the last 10 minutes of his speech was recently posted on YouTube under the banner “Most Disturbing Presentation Ever: Our Tech Nightmare.” From there it spread to Hacker News via a blog hosted by IEEE Spectrum, which said:

Schell’s apparent goal is not to scare his audience. He’s way beyond that. His attitude is that, given how close we already are in theory to experiencing life as a game, it’s clearly something that’s going to happen and we better make sure it gets done right. But, sorry Schell. While you may not have wanted to, you scared me and a whole bunch of other people.

But if the early enthusiasm that greeted Schell’s vision was over-enthusiastic, this new wave of alarm is also overdone. There may be a future for Foursquare-like startups that can create compelling game-like features in apps. But marketing is an entirely different matter. Marketers and advertisers are the eternal gate-crashers in the world of content. The best ads have always been the rare ones that engage consumers intelligently. The worst ads have taken a cynical approach, viewing consumers as so many behavioral buttons to be pushed.

Schell is probably right that there’s a home for video game designers in marketing and that behavior-detecting sensors will grow ubiquitous in time (just as behavior tracking on the web is nearly ubiquitous today). But the old-fashioned distinction between good ads and bad ads remains the same, and will be played out again on a larger scale as new technology takes marketing to a broader, and potentially more intimate, platform.

So if marketing companies are excited about using emerging technologies to play new games with consumers, they should think twice. The rewards may be greater, but the task will be much trickier. Consumers, after all, have only so much time and attention for games. It is already difficult enough to make any game engaging. Keeping up with frequent-flier programs, credit card reward programs, and so on can be tiring after a while.

Now imaging that the new rewards-based game your company developed has to compete not just with those, but hundreds of other new marketing games targeted at an overtaxed audience. Just this week, New York City tried to induce citizens into good behavior with the most basic of rewards — cold hard cash — but it failed.

Eventually, the consumer appetite for games will reach a saturation point, and these campaigns will be seen as just another cynical ploy to manipulate us into spending money. We like games because they offer a needed respite, even an escape, from the grind of everyday life. But if life becomes a game, where’s the respite? The escape becomes the very thing we wanted to escape in the first place.

Image courtesy of Mike_fleming from Flickr.

It’s so tempting to get drawn into the ego battles between Steve Jobs and the Google triumvirate while placing bets on who will win that it’s easy to forget a deeper truth about this rivalry: Google and Apple need each other.

They both have a deep desire to stake out claims on the mobile web, but the mobile web is in a nascent stage. In order to develop, it needs to have both rigid structure and a sometimes reckless creativity. Structure is necessary to provide a strong foundation and a set of standards everyone can understand. And creativity is essential to bringing the innovative potential of the mobile web into full bloom.

This dichotomy was present when the Internet began to develop in the early 90s. Many people who came online then did so through America Online’s walled gardens, a safe little enclave where consumers and content providers alike could create the rules of a new medium. Then the web itself took off and sites like Yahoo and GeoCities offered a much more creative environment to explore what else could be done.

Now it’s happening again, only with Apple and Google. Apple’s stern and unforgiving approach to the iPhone offers the structure this new medium needs to succeed. Cupertino’s control-freak tendencies stretch from enforcing adherence to ever-changing app guidelines to banishing plastic screen protectors from its retail stores.

Google’s approach is nearly the opposite, much more open and free-wheeling. Its Android OS, based on the Linux kernel, has so many versions available the company is struggling to consolidate them. The Android Market is such an unregulated affair that it’s hard for anyone to count the number of apps on sale.

Google’s culture has built into it a tolerance for the failures that come with creative experiments. Its 70-20-10 rule seems rooted on that spirit of tolerance — how many companies require employees to spend time on something that may never fly? — and Google has floated so many failed ideas it’s hard to keep track of them all. Apple, by contrast, starts with an instinctive idea of how consumers will experience its products and fits everything, even the ecosystem of apps that extends beyond its corporate walls, into making it work.

It’s in the tension between these two companies and their respective cultures that the mobile web is being forged. But as America Online found out, the walls eventually come down as consumers grow more comfortable with the new medium and desert the walled garden. That would suggest the balance will tip in favor of Google.

But I would be surprised if Apple isn’t anticipating this evolution. Right now, iPhone owners are experiencing the mobile web through the 150,000 or so apps it offers through the App Store. But Apple has also backed HTML5, which allows a smartphone browser to have rich app-like features without requiring any new software to be downloaded. Just as people stopped downloading AOL’s software and switched to browsers, we may well abandon most of the apps on our phones today.

Both companies will continue to play a major role on the mobile web, but I doubt either will ever gain the upper hand. This dramatic tension between Apple and Google may be around for a long time. So executives at both might as well get used to it.

Image courtesy of Wikimedia Commons.

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Our future viability is dependent on our ability to execute these plans successfully. If we fail to do so for any reason, we would not have adequate liquidity to fund our operations, would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under U.S. Bankruptcy Code… It is possible that a successful and efficient implementation of an exchange or any of the other strategies we are pursuing will require us to make a pre-packaged, pre-arranged or other type of filing for protection under Chapter 11.

That couldn’t have been a very fun moment for Blockbuster. Still, if you’ve been following the company, you’ve seen the white flag of surrender raised a few times before. It was there in the company’s last earnings call, when CEO Jim Keyes talked about how Netflix grew market share while his company focused on its balance sheet. It showed again when Keyes appeared on CNBC and, in response to rapidfire questions about Blockbuster’s strategy, he kept putting on a hard-luck smile and insisting it wasn’t too late. And again when Blockbuster re-introduced late fees in the stores — that is, in the stores it’s not planning to shut down.

But informing investors of the possibility of bankruptcy is the law, and so Blockbuster is filing to formally notify the SEC of what many investors already know. Of course, filing for bankruptcy is hardly synonymous with corporate death. It simply means you seek court protection from debt-holders while you restructure. In Blockbuster’s case, the move is seen as part of a debt exchange with its creditors.

But once Blockbuster does emerge from bankruptcy, its larger problems will still remain. It operates a chain of expensive brick and mortar stores in a world turning digital. It tried and failed to price Netflix out of the DVD-by-mail business, and sat back as Netflix built a loyal audience for its streaming movies. It passively let Coinstar corner the DVD-rental-kiosk niche that further weakened its stores.

Now, according to Bloomberg, the company is exploring a consignment-sales model where Blockbuster will, instead of buying DVDs from movie studios, rent them shelf space in its stores. The move is aimed at cutting costs, but it will also lower revenue. And revenue has already been in decline for the past several quarters. The company has also been experimenting with new ways to deliver movies, but lags behind Redbox’s rental kiosks and Netflix’s instant streaming.

Blockbuster says it’s in discussions with movie studios about allowing its customers to rent movies through Blockbuster Express (its answer to Coinstar’s Redbox kiosks) on the same day that the movies are available for sale on DVDs. Currently, Netflix and Coinstar must wait four weeks after the movies go on sale. But it’s not clear why studios will want to award special privileges to a company that may be approaching bankruptcy.

Or possibly liquidation. Because if a restructuring doesn’t work, then Blockbuster might be forced to shut sown and sell off its assets to pay its debts. Some vulture investors will lick their chops over the prospect of a distressed retailer because of the value of the real estate it owns. But Blockbuster is likely to disappoint here as well. As Keyes pointed out on the CNBC interview, it owns only 3,500 of its 6,500 stores, and rents the rest.

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And no sector is riper for deal-making than tech, especially those companies active on the web. Not only has the economy been stable for nearly a year, but web companies that survived have emerged with leaner operations and more cash on hand. Perhaps more importantly, the web has evolved to a point where mergers are starting to make strategic sense.

Here’s why: Over the past several years, web content has developed something of a split personality. Part of it is driven by information, navigated by search and static in nature. The other part is driven by conversation, accessed through discovery and protean in essence. This distinction has been around for some time, and discussed at length on this site, but it’s becoming more and more of an acute reality, especially when it comes to big web companies.

The dichotomy is becoming clearer in data as well, as evidenced by a report from Hitwise this week comparing the downstream news traffic of two sites, Google News and Facebook. The 10 sites that Google News drives traffic to have next to no overlap with the sites to which Facebook members are linking. Only CNN.com is on both lists. And while print media dominates Google News’s list, People is the only print-oriented publication on the Facebook list.

It’s also clear that the conversational web isn’t going to make the informational web irrelevant. Rather, they complete each other in a Jerry Maguire kind of way. So marrying the informational web to the conversational web is appealing to companies. It means greater mindshare among their users — and therefore more opportunities to serve them ads or coax them into premium subscriptions. It means higher profits if they can combine the two without a corresponding increase in operating costs. And it means a more integrated, seamless experience of the web — instead of its fragmented nature today, with people jumping from site to site.

But the catch is, people like the web fragmented. They get nervous when a single company promises them that unified, seamless experience. That’s why Google has launched social network (Orkut, FriendConnect) after social network (Wave, Buzz) without gaining solid traction. Buzz won terrific reviews on its launch, but there’s just something troubling about letting Google – or any one company – stalk all of our online behaviors.

And that leaves Google with little choice but to buy its way into that Maguire-ish state of completion that it so craves. Of course, many companies crave such a state. To that end, speculation that Microsoft might make a play for Twitter has been around for some time, though the issue was inflamed by comments made by Steve Ballmer this week. Just ask Yahoo how hard it is to say no to Ballmer.

All it will take is one big deal to start a wave of web mergers. It might not even come from Google or Microsoft. Facebook understands the need to extend its reach into the informational web – a key reason for its Facebook Connect alliances with companies like Yahoo. A merger with Yahoo would present its own share of problems for Facebook, but it would turn the company — overnight — into a formidable web giant. Not to mention the fact that it would an alternative to the IPO that the company seems to be dreading.

Image courtesy of Mykl Roventine on Flickr.