How Terry and Meg are marrying off Yahoo! and eBay

It is interesting to see what happened at Yahoo!, six months after Brad Garlinghouse’s ‘Peanut Butter Manifesto’ was leaked to the Wall Street Journal. In general, he called for focus and job cuts.

It looks to me like Yahoo! is quietly implementing Brad’s underlying recommendations. Focus is in fact increasing (but as a content aggregator Yahoo!’s coverage remains naturally wide). Job cuts could be on the cards next. Still, Yahoo! seems pretty phlegmatic in executing its grand plan. Take for instance Facebook. As Mr. Zuckerberg is looking for more and more money, a deal with Yahoo! is getting less and less likely.

As Yahoo! is focusing and eBay is expanding its branch of e-commerce operations (see below), speculation over increased cooperation or even a merger may continue.

So what action have we seen at Yahoo? First of all, a restructuring into three groups was launched: Advertiser & Publisher, Audience and Technology. Some high-profile vacancies were created in the process. As Susan Decker seems to be heading for the CEO job when Terry Semel retires later this year, the company is trying to hire a CFO and an Audience CEO.

Second, Yahoo! got focused on improving its search engine and monetisation efforts under the ‘Panama’ banner.

Third, it is defending the display market that Google is entering. Yahoo! is building ‘brand universes’ for large advertisers and it acquired Right Media. Also, it entered into a large newspaper cooperation.

Fourth, Yahoo! continued the ‘relaunch’ of its verticals, lastly Yahoo! Finance and Yahoo! Travel. At the same time, the company has started discontinuing other sites, such as the North American Auctions business and Yahoo! Photos (which will migrate to Flickr). Yahoo! Bookmarks and del.icio.us could be merged, but the former is simply too successful to discontinue. New verticals include Yahoo! Food.

Fifth, Yahoo! continually expands its community features. It bought blogging services MyBlogLog and Wretch (Taiwan), as well as Bix.com (runs contests). The vastly popular Yahoo! Answers teamed with Answers.com. A deal with Reuters will see uploaded photos and videos appear both on Yahoo! and Reuters.com. The new Yahoo! Pipes allows for the creation of mash-ups.

A different way of seeing increased focus is by looking at what does NOT offer: no satellite images such as Google Earth and Microsoft Virtual Earth; no Office look-alikes such as Google’s Docs & Spreadsheets and its soon-to-launch presentations tool; offline efforts are largely limited to wireless and print (no radio, TV, outdoor and in-game, as we have seen at Google); e-commerce activities are limited to certain countries.

The latter easily leads to some eBay speculation.

First, as Yahoo! is focusing, eBay is in fact expanding without creating more overlap. The e-commerce activities comprise not only the core auctions business, but a growing list of related services and sites: Buy It Now, eBay Express, Shopping.com, Rent.com, Craigslist, Marktplaats.nl, Kijiji. Recently eBay added StubHub (ticket sales) and possibly StumbleUpon (recommendations).
As a side note, it is quite easy to list a few takeover candidates for eBay to grow further within the e-commerce sector: single-item retailers (Woot.com in the US, iBood.com in Europe), travel (Expedia, Orbitz, Travelocity), securities trading (E*Trade, Zecco.com), swapping (La La Media) or even Amazon.com.

Second, Yahoo! and eBay are already partnering on a number of services (search, ads, payments, communication).

Third, strong positions in the Far East make a nice fit as well, as overlap is limited.

Fourth, eBay is aiming for increased community activity (see StumbleUpon) - a core strength at Yahoo!.

Would Terry Semel and Meg Whitman feel any urge to do a large deal before retiring or moving into politics?