In the shadow of a giant

In my previous post, I linked to the same article by Rich Skrenta that Jason Calacanis did; it’s a brilliant dissection of the implications of Google’s dominating market share in search and advertising. Every Internet entrepreneur should read this, period. There are just so many great things to learn (for instance, learn why Google’s search page CPM is so high vs the rest of the net, how zero-switching costs actually create a winner-take-all environment, how old giants like IBM and Microsoft can be leapfrogged during a paradigm shift, etc.). What really caught my eye though was Rich’s thoughts on how much Yahoo could add to its bottom line by farming out its search and advertising to Google. He estimates they could obtain at least an 85% rev share which would take them from $0.10/search to $0.17. That’s a 70% increase in search revenue overnight, or an extra $1.5B or so of yearly revenue. I can’t see how Yahoo and its stock holders can ignore this.