Yahoo! (NASDAQ: YHOO) will outsource its real estate section to Zillow, a popular listings site. The transaction calls for Zillow.com to oversee a network that will place home listings and ads from local real estate brokers on Yahoo! and its own Zillow.com website.
The deal may be good for Zillow which is a very small company, and it helps Yahoo! avoid a costly burden. A large amount of content and e-commerce activity at Yahoo! and its rivals is already outsourced, saving them from investing in the staff and infrastructure to support hundreds of services for their users. For example, MSN.com has Fox Sports handle most of its programming in that area.As Microsoft Corporation (NASDAQ: MSFT) and Google Inc. (NASDAQ: GOOG) have become the search providers for Yahoo!, AOL, MySpace, Facebook, and a number of other sites, portals are changing. These sites no longer try to do everything themselves. Some worry that the strategy will leave portals as shells tethered to the business decisions of its suppliers.
The economy of running very large websites may have become too burdensome for MySpace to deliver many services of its own. It is a business with under $1 billion in revenue. That can hardly support enough staff to provide dozens of content channels that run the gamut from sports to finance to search to real estate.
Yahoo!’s decision makes Zillow a powerful company. That power may eventually come back to haunt Yahoo! just as MSN’s to partner with Fox could. The day may come when Fox does not want online partners, or it decides to de-emphasize sports coverage on the internet because it cannibalizes its TV viewership.
Cheap sometimes gets expensive.
Douglas A. McIntyre
Top Gaining Stocks
Top Losing Stocks