Blog Post

Large-Cap Internet Courtships: Do They Make Sense?

Updated again: JP Morgan Securities has come out with a 56 page report that is bound to stir some controversy: it examines the feasibility of big-scale Internet mergers, of the likes of Yahoo-eBay (most feasible), MSN-Yahoo, eBay-Google, eBay-MSN, Google-MSN, Google-Yahoo (least feasible).
Its view: a partnership or strategic event among large-cap Internet companies is likely due to 1) increased scale, 2) strengthened global footprint, 3) broadened user insights, and 4) improved operational efficiencies. We also believe recent share gains and product introductions by Google are compelling other large-cap Internet companies to explore strategic alliances.
Two most likely scenarios:
— a partnership or merger between eBay and Yahoo is the most strategically feasible. A combined company would have the leading position in auctions, communications, payments, graphical advertising, audience reach, and geographic breadth. It would also have deeper knowledge of its users and hold a strong position in the SMB market. The combined company could generate F’07 revenues and OIBDA of $13.9B and $6.5B.
— Another feasible combination would be a partnership between MSN and Yahoo. A partnership could create 1) formidable strength in graphical advertising, 2) increased search scale, 3) a substantial access point advantage, and 4) organizational synergies. The combined company could generate F’07 revenues and OIBDA of $8.6B and $2.5B.
The PDF of the report is available for download here (PDF link)
Updated: JPM seems to have taken the PDF down, for reason unknown.
Updated again: The link is back up, here. Thanks guys…

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