The rumor mill is busy spinning out various merger/acquisition options for Yahoo. Starting with Microsoft’s takeover of Yahoo to Yahoo’s discussions with Facebook to News Corp’s attempt to control Yahoo by throwing the bait of Myspace to Yahoo-Ebay merger. Some of them are good for Yahoo while others are bad in the long term perspective. Yahoo acquiring facebook will strengthen Yahoo. Similarly, Yahoo-Ebay merger will make a formidable foe against Google. Yahoo yielding to News Corp will be a disaster from Yahoo’s point of view. Microsoft’s takeover of Yahoo will lead to death of Yahoo brand in a long run. There is already a huge discussion on the blogosphere regarding Yahoo-Ebay merger. Let me analyze these options from my perspective.

Terry Semel’s departure from Yahoo offers them the much needed breathing room. Terry Semel did an amazing job of saving Yahoo during the dot com bust. But he was not a technology person. Yahoo tried to be both a media company as well as a technology company. This lack of focus was one of the reasons for Yahoo’s downfall. In fact, this is one of the reasons for the departure of top Yahoo engineers. Essentially, one of the major points of Peanut Butter Manifesto was the call to focus. Semel’s departure offers an opportunity to put their act together and focus on the strengths of Yahoo. Apart from the immediate need to focus, sooner than later, Yahoo will have to make a decision on one of the ongoing rumors.

If Yahoo yields 25% stake to Rupert Murdouch for Myspace, it will mark an end to Yahoo spirit. First, 12 billion valuation for Myspace is too much in this facebook era. Second, Rupert Murdouch is no Jerry Yang or Filo. He doesn’t care about the technology part of Yahoo. All he cares is whether it will help him make big bucks. With 25% stake on Yahoo, he can drive it in any direction he wants. This will lead to the dilution of Yahoo identity. In the long run, we may even see an end to Yahoo, a pioneer in the internet revolution.

If Yahoo agrees to a Microsoft buyout, it can offer a formidable challenge to Google in the short run. But, Microsoft, which is actually Yahoo’s “enemy” in the marketplace, will consume Yahoo’s technology and dilute the Yahoo brand. Anyhow Google is much smarter than Microsoft management and they will ultimately win the battle with Microsoft-Yahoo combo.

Yahoo missed a golden opportunity to acquire facebook sometime back. With the release and eventual success of facebook platform, the cost of facebook acquisition is going to go high. One of Yahoo’s strength is its community. They showed that with the success of Yahoo answers. If they add the facebook community to Yahoo’s existing community, they will have a mamoth playground for themselves to play. Unlike Google or Microsoft, Yahoo was not developing an unified platform. Facebook acquisition will give them a jump start on this and they can easily catch up with Google and Microsoft on the platform game. In my opinion, Yahoo should seriously pursue facebook instead of Myspace, if the rumors about getting Myspace community are true.

Yahoo-Ebay merger will be a good one. As Tim Poulus and Watch Mojo say, there is not much of overlap between them and they can merge as equal partners. Yahoo’s content and adplay, along with Ebay’s ecommerce success, can prove to be a formidable foe to Google. It will also put Yahoo back in contention for world domination.

I am in favor of Yahoo-Ebay merger and, if possible, an acquisition of facebook. I feel that this combo can prove to be an effective force to stop Google from monopolizing the web. What do you think? Feel free to offer your take on this topic.