Blog Post

Yahoo eBay Deal: Analyst Reactions

Positive overall, it seems:
Bruce Richardson, AMR Research, said it would be difficult for Google and particularly Microsoft to win such large partnership deals because their competitors have no desire to make either company stronger. Instead, he sees Microsoft and Google making small acquisitions to gain strength and fill in any technology holes either company might have.
Alexia S. Quadrani, Bear Stearns: The main concern that has weighed on Yahoo’s stock has been the increased competitive marketplace online. “We believe a partnership with the No. 5 destination site on the Web helps bolster Yahoo’s competitive position,” Quadrani wrote in a research note. “This deal may also weaken competitor MSN’s position given speculation by newspapers such as The Wall Street Journal (4/21/06) that MSN might partner with eBay.”
Mark May, Needham: We believe Yahoo comes out on top in this deal, though we would have liked YHOO to have outsourced its auctions business to EBAY. Not only does Yahoo benefit directly by expanding its advertising network, the economics of online advertising are such that a larger network (i.e. more pageviews) often yields greater pricing power. We believe this deal also highlights YHOO strengths over GOOG and MSFT in certain important areas: 1) leading graphical advertising capabilities, to enhance EBAY’s revenue streams (MSFT is also strong, GOOG in development); 2) strong search market share, to enable EBAY to generate more traffic (GOOG strong; MSFT in development); and 3) a number of premium services and e-commerce properties, in order to power PayPal (GOOG and MSFT both lack scale here).
Scott Devitt, an analyst at Stifel Nicolaus: May not result in taking market share from Google. Among other things, for PayPal, “the ability to cross-sell a payment platform on the largest traffic network on the Internet is significant to and very beneficial to the market value of the PayPal piece of eBay,” he said. “It’s not so much about shifting query share as taking under-monetized components and filling holes with partners,” he said. “Unless there’s something over time which shifts query share, it’s not that big of a strategic move (in relation) to Google.”
Safa Rashtchy, Piper Jaffray: The deal is most important and positive for eBay as it allows the company to finally join the ranks of search and advertising-based growth companies. It is second to Yahoo as it gains a major distribution deal and near-term and financial negative for Google as it missed on some additional revenues.
— Citigroup analyst Mark Mahaney: eBay’s “the big winner” in the agreement. “This deal should improve the position of an already very strong PayPal franchise…But what’s potentially most needle-moving and thesis-changing here is eBay tapping into display advertising.” [via Marketwatch]
— Morgan Stanley analyst Mary Meeker: the deal should be a “win-win” relationship for both Yahoo and eBay, generating 5% more revenue for both businesses. She went on to say that any potential partnership between Google and an online-payment provider or VoIP provider could benefit the company as well. “It’s key, in our view, for Google to think more aggressively about partnerships,” added Meeker.
Rafat Ali…um, from here, on NPR’s Marketplace: This seemed to be the most logical way for it to firstly monetize itself, monetize meaning you basically get as much money out of every page view you have on your website as you can. And this seemed to be a better way of doing it. Where Yahoo would do all the work for them.