Yahoo fools, Google drools

Articles all over the place today on YHOO/MSFT.

Let's start with Yahoo/Google. If Yahoo were to outsource their search business to Google, it would be good for margins and terrible for the thousands of sales reps that would lose their jobs as they'd be dead weight. It would also destroy Yahoo's branding. Yahoo had used Google for search results in the past and they found that they lost search customers in droves to Google over time. They bought Inktomi to try to hold onto those users and stop farming them out the back door to Google. It's a dubious strategy if they want to remain an independent franchise. It's a bluff -- it's purely a "test" at this point. They're willing to try almost anything to get Microsoft off their ass. Why it's so important they run their business into the ground by themselves is beyond me so I figure they're just trying to get a higher bid going.

Yahoo is also reportedly discussing plans to merge with AOL's internet unit ex dial-up. Yecch. I don't see how that's better than Microsoft. In fact, it would result in dilution and a quick 40% drop in share price. AOL won't be a better dance partner. Bad idea.

Microsoft and News Corp are reportedly exploring a joint bid. As News Corp early in the process was thinking about dumping Myspace into Yahoo, this seems logical. It probably creates utter confusion and winds up great for Facebook and Google who have all the momentum. As a bonus, it'd get Google out of that lousy myspace deal they're stuck with for another couple of years.

Every scenario seems good for Google as the competition becomes a mess of misalignment, internal politics and layoffs. It would open the field up for them for years to come. Too bad I can't get a handle on the Google quarter... there's lots to like about their positioning here.