A Sly Fox, MySpace and Yahoo

MySpace and Yahoo should merge.

That was the single thought that finally dropped into my slow-as-molasses brain this past week, after finally discerning the meaning of a very interesting comment that Rupert Murdoch (pictured below) made in an interview a month ago.

As I often do, I brought some reading on my recent trip to Dublin and London that I have been meaning to catch up on, most especially a recent interview the News Corp. head did with Time magazine’s Eric Pooley.

While a lot of people, including myself, focused on his many and varied thoughts on the possible and seemingly endless acquisition of Dow Jones (owner of this site), one comment stuck in my head for days after I read it: floating the idea of trading a 25% stake of Yahoo for MySpace. (A Yahoo exec had actually pointed me to this quote weeks ago, but I ignored him.)

As the article noted:

MySpace’s much smaller archrival, Facebook, is surging: what started as a narrower college site is broadening and accelerating … But as MySpace showed signs of reaching saturation, Murdoch began very preliminary, exploratory talks about trading the site for 25% or more of Yahoo. ‘Terry Semel was enthusiastic about it,’ he says of the then Yahoo CEO. ‘We were looking to see if it was a good idea. I wasn’t sure.’ Now Semel is gone, and Murdoch needs to see what Yahoo will become under its new boss, co-founder Jerry Yang.

In one fell swoop, Murdoch had confirmed the talks, but made it seem as if it was Yahoo’s execs who were desperate to do a deal (and you know Semel and Yang would never talk about how they felt about it), while also giving MySpace an instant valuation of $8 billion at today’s nearly $32 billion Yahoo valuation.

Given recent rumors abounding now of the much smaller Facebook declaring itself worth upward of that, including some of a big offer for the social network from Microsoft, it is no small leap to imagine the sly Murdoch calculating that he should be thinking right about now about getting while the getting is good and the hype is at an all-time high.

To merge his massively popular social network with Yahoo’s still-powerful-despite-struggles ad and search empire would create a powerful media and technology giant that would have a lot of key elements for the next generation of Web interaction.

For Yahoo, which is in need of a dramatic move, this would deliver a smack to Google (which still has reportedly not completely closed its $900 million ad deal with MySpace), solve its inability to enter the social-networking space and boost its distribution network dramatically.

For MySpace, Murdoch gets to unload a service that is increasingly going to need a major dose of technology expertise and own a big chunk of what could be a drastically undervalued property.

There are, of course, the endless rumors of such talks that still swirl. But with all the focus on Dow Jones and Murdoch (which is about to reach its culmination in a few hours, actually), wouldn’t it be interesting if an even bigger–a least in terms of billions–deal was brewing elsewhere?

Please see this disclosure related to me and Google.