Yahoo....why not build Netscape 2.0 instead of buying Facebook?

This post expands on an original aside re Yahoo on another post (on Facebook being a closed "AOL" type SocNet)

Deep Jive reports that Bear Sterns has just decided Yahoo should buy Facebook - (well, they would, they are a merchant bank* - hmmm...first bank raising its head....another sign of Bubble 2.0), and says this is the non-glib answer. We disagree - Yahoo has all the assets it needs to better F/B - plus a huge user base - and it should probably cost a fraction of a purchase to "get its shit together".

Valuation of Facebook is $5-6bn apparently - sorry, this seems like Bubblenomics, and $5bn is serious money - just consider what sort of service you can build if you developed with 10% of that, and then spent a few $bn to recruit users.

And there is a caveat emptor with these SocNets....

(i) there is - as yet - nothing that shows customers do not just go from one to the next (if anything the evidence is pointing the opposite way). This is reminiscent of the Mobile Licence bids a few years ago, where some very large Telcos hobbled themselves paying irrationally large (ie company breaking) sums for those overvalued assets.

(ii) So you buy Facebook at the top of its Hype Cycle for $5bn...now look back over the last 8 years, there is a New New one every 2 years or so, so Yahoo (on past form) have 2 years to amortise it before the next one rears its viral head.

Not only that, but all the current plays are closed systems - like AOL et al in the early 'Net - there is certainly an opportunity for the open play, the "Nestscape of Web 2.0", and once it emerges...well, you are looking at decline in any closed system.

Why not Yahoo step up, this time round, as the SocNet NetScape. Marc A. is building another closed one, Ning, so the position is vacant

Yes, Yahoo has to dump some peanut butter to get this sort of execution (or skunk it), but study after study shows M&A deals usually destroy value - yet it is often the first thing managements under pressure reach for...

So, is the glib answer possibly not the DiY play in fact, but the "buy Facebook" play?

* who don't seem to be able to manage their own businesses, so are eminently qualified to comment on other industries