Techcrunch has some disturbing news, apparently Yahoo is looking to merge with Myspace, and provide Myspace with 25% stock of the new company. Total worth, $12 billion.

The developer in me becomes nauseated when I think that Myspace, which allows users to override page CSS, etc by poorly validated input injections, could ever be worth anything more than the gunk that collects on the bottom of my shoes after a run outside.

But, the business mind in me realizes what the numbers actually mean, which is the value of the userbase. Some of the numbers, however, don’t really add up.

Consider that Newscorp picked up Myspace two years ago for $580 million. At the time, we could reasonable estimate that Myspace had about 30 million active users ( don’t believe the little “Your network” numbers, 40% of those are dead accounts and spammers ). That would place Newscorp’s value on each user at around $19.

From an advertising standpoint, they basically are banking that each user will generate them around $19, on average. Of course, I’ve never clicked an ad since signing up at Myspace in 2004, and I’m sure most user’s don’t even pay attention to the ads at all.

But, you do have the large group that are, in simple terms, idiots, and fall for the FREE RINGTONES and SHAVE HER LEGS AND GET A FREE IPOD advertisements. They then sell off their information to one of Myspace’s ad partners, and help roll money back into Myspace.

Rupurt Murdoch estimated that Myspace’s ad revenue in 2007 would be $500 million, on top of the $250 million it pulled in last year. Newscorp’s investment will be paid off by next year, with that magical ‘monies per user’ average hitting $20 in advertising revenue alone.

Where things get really interesting is the residual value outside of traceable metrics. Each Myspace user is averaging out to $19-$20 in income for Newscorp directly, but how much more money is coming in due to the shameless Fox movie redesigns every week? The message boards for these fake accounts are full of teenagers talking about how hot the movie actress is, or how cool the cars are in the latest Hardcore Tuner shitacular. This is the true value of the average Myspace user. They are unable to think, or form an educated opinion on their own, and instead flock to the newest movie ad ‘profile’, generating tons of free word-of-mouth advertising for Newscorp.

This, coupled with the standard $20 per user ad revenue, somehow comes out to a valuation of $12 billion for the website and it’s userbase. That roughly averages out to $120 per Myspace user. You could assume then that Newscorp puts a $20 price on it’s average user for the ad revenue, and a whopping $100 for the word-of-mouth and revenue generated from the movie, music, tv profile ads.

The sum of this post: Dear god Yahoo, don’t do it Although, if there is anybody that could take Myspace and turn it around, it would be either Google or Yahoo.