Yahoo is a better fit for Apple than meets the eye

By Michael Tarsala

The most cogent, detailed reasoning to-date for Apple buying Yahoo was posted this week by Eric Jackson, founder of Ironfire Capital, who says that Apple may need to take on bigger deals to keep its earnings growing at 90% a year.

Jackson argued that by buying Yahoo, Apple would gain access to mobile apps, patents, Yahoo’s search business and payments technology all for about $8 billion in net cash, assuming the average 30% technology deal premium. It would be just peanuts for Apple, considering that Credit Suisse expects Apple’s domestic and offshore cash pile to swell to $136.6 billion this fiscal year.

Will a deal happen? That’s not for me to say. Any number of companies could buy Yahoo, including private equity firms. Even Facebook is now rumored to be in the hunt. Back in 2006, it was the reverse that was true… Yahoo was rumored to be making a play for Facebook!

But here’s one more reason why Apple buying Yahoo makes sense: Deep down, there’s a corporate DNA match.

Kings of Curation

Think about this: Both companies are among the best in the world at curation. Yahoo does it with news, images, and blogs. Apple does it with music and its array of mobile applications. It’s not really what Microsoft or Facebook, two other oft-cited Yahoo buyers, are all about. Those companies do not have the “curation” gene.

Apple-Yahoo could result in what Amit Kumar, founder and CEO of startup, has called, “the App Store of Internet Content”.

How It Could Work

Imagine Apple creating an app that links all the content on Yahoo to an image-based application, somewhat similar to, a sleek content front end for your iPad and iPhone. Click on your curated selection of news and/or celebrity images each hour, based on your viewing habits, and uncover layer upon layer of both free and paid content.

Tie that to Yahoo’s display and mobile ads, and also link it to an app store where you can shop. Finally, factor in the rumored Apple mobile payments system that lets you swipe your iPhone and pay for the content and goods you find along the way.

Why Jackson Is On To Something

The logic that Jackson expressed now comes to the fore: To pull off a plan like that, Apple will need loads of web-based content, better search, a huge ad sales team, and all the help it can get with mobile ad technology.

Enter Yahoo… a better fit for Apple than at first meets the eye.